Balancing divorce and bankruptcy in New York
New Yorkers who are interested in filing bankruptcy when getting divorced should evaluate whether to file before or after the divorce.
Many things can contribute to the breakdown of a marriage in New York. One of the most common factors in marital troubles is money. Financial hardship as well as different financial styles can put excessive strain on a relationship.
How do money and marriage intermix?
When considering the possibility of getting divorced, many couples may also be evaluating whether or not bankruptcy can help them get the fresh start they are seeking. The Balance explains that in addition to any financial problems that may be present leading up to a divorce, life after a divorce can be filled with its own set of financial issues as well.
It can cost as much as 30 percent more to live separately than with another person. When the need to pay spousal support or child support is factored in, a person’s monthly debt-to-income ratio can look rather bleak. Additionally, a divorce generally sees each spouse lose some amount of financial assets whether in the form of a home, a retirement account or something else.
These realities make it understandable for people to look to bankruptcy at this time for help. But, one big question they need to answer is whether or not they should file for bankruptcy before filing for divorce or the other way around.
How effectively can you work with your spouse?
My Horizon Today suggests that one of the most important factors in determining whether bankruptcy or divorce should take place first is how well the two spouses can work together. Clearly there are some challenges or there would be no divorce. But, if those differences can be set aside for a greater good, there may be benefits to completing a joint bankruptcy before getting divorced.
However, no decisions about bankruptcy in the context of a divorce should be made without engaging an experienced bankruptcy attorney to analyze the situation. Whether to file for bankruptcy, whether it should be joint or single, which type (liquidation or reorganization) to file and the timing of filing – before, during or after a divorce – can be complex legal questions involving many issues related to the individual financial circumstances of the divorcing couples.
What type of bankruptcy is sought?
If people are interested in Chapter 13 bankruptcy as a way of saving a home, for example, they should probably look to do this separately after a divorce. Chapter 13 bankruptcies last for several years and could therefore either prolong a divorce or require additional changes after a divorce is finalized. A Chapter 7 bankruptcy is much faster and may be easier to complete prior to a divorce.
What is the value of the couple’s assets?
Asset value matters a lot when choosing a bankruptcy because it can affect whether or not some assets are lost or kept in a Chapter 7 bankruptcy. The value of assets may change based upon a property division settlement so evaluating different options here can help show people which kind of bankruptcy and its timing are likely to be more advantageous to them.
How can I get help making this decision?
There is no one-size-fits-all approach to getting divorced and filing for bankruptcy and many factors can have big impact on decisions in this context. For this reason, New Yorkers facing these two major events should contact an attorney for help and advice to steer them toward wise and informed decisions.