Regrettably, many times by the time the divorce is imminent, the spouses don’t want to speak to each other. They may be a little suspicious and not want to share financial information. This is understandable, but may also be costly if 2 bankruptcies are required.
If you can file with your spouse, you will pay HALF of the fee that you would pay if you each filed separately. By filing together and getting rid of as much of the marital debt as you can, the divorce itself generally goes much smoother, faster, and efficiently. All of which will also reduce the cost of the divorce attorneys.
A lot of professionals say that bankruptcy is the last step of the divorce. No one wants to file bankruptcy, but for most couples, there is no other way to start over. After a divorce, the family income and family debt remains, but there is even more financial pressure than before, since there are 2 sets of household expenses instead of one. Rather than having it be the last step, however, it may be worth considering whether it should be the first step towards the final separation. It is much easier, and less stressful to “start over” when you aren’t burdened by debt incurred while married.
This is the reason some of the questions we get from divorcing couples most often are whether they should file together, or separately, and whether they should file before, or after, the divorce is finalized.
If the debt is mostly credit card debt, personal loans, medical bills, and the like, and there is no house or mortgage, it is almost always better to file jointly prior to the finalization of the divorce. This will cost less, as the couple will only be paying one legal fee, and one filing fee, and will usually simplify the divorce as well. The parties won’t have to argue about who will pay which debt, as the unsecured debt should be discharged in the bankruptcy. If you can get along well enough to move forward together, there will often be less stress in the divorce proceeding and there is a better chance you will be able to have a civil relationship after the divorce is over. Just like for married couples, the amount and treatment of debt can significantly impact a couple’s relationship after the divorce. If you have children together, it’s imperative to try to maintain a working relationship and getting rid of your unsecured debt early will maximize your change that you can do so.
On the other hand, if the couple has higher than average incomes, and would otherwise “fail” the means test as to eligibility for a simple Chapter 7 bankruptcy, it may make more sense to at least wait until the parties have physically separated their households to avoid becoming ineligible for Chapter 7 due to excess income.
A chapter 7 generally only takes about 100 days from start to finish, so it is very possible to file the bankruptcy and discharging the unsecured debt, without delaying the divorce proceedings which has a “cooling off” period in CT anyway.
Things become slightly more complex if there is a home. If the mortgage is in arrears and a Chapter 13 will become necessary to bring the mortgage current, it’s probably better not to file jointly. A typical Chapter 13 proceeding takes 3 – 5 years (rather than the quick 100 days of a Chapter 7) and, among other reasons why it wouldn’t be prudent, a divorcing couple is unlikely to remain on good terms long enough to complete that plan. If a Chapter 13 is necessary, it may make more sense for the party keeping the house to file alone, and for the other spouse (assuming he/she has debt as well) to file a Chapter 7 alone. The legal fees and costs will be higher but still worth it in the long run to eradicate the debt.
Remember, your creditors won’t be a party to your divorce. So if, like most couples, your credit cards and personal loans are joint, you are both liable regardless of what the divorce decree says about who is supposed to pay. The safest way to protect one another from future collection lawsuits (which can happen even with the best of intentions if the party assuming the debt becomes ill or has a loss of employment, for example) is for both parties to file prior to the divorce.
The long and shot of it is: If you and your spouse can get along well enough to file bankruptcy together before you get divorced, it’s certainly worth speaking to an attorney about going that route.
Bankruptcy can also be used to terminate contracts that neither person wants any longer – such as car loans, or car leases, or mortgage notes on houses that neither party can afford and are so far underwater that they can’t be sold.
Filing Bankruptcy for Same Sex Marriages
For a couple of years now, the federal courts have recognized the legitimacy of same sex marriages. So, in 2016, a same sex marriages and bankruptcy filing is handled exactly the same way as a heterosexual couple bankruptcy filing.