When making the choice between pursuing bankruptcy and divorce (as far as which should come first) many couples dealing with debt can find this to be a difficult question to answer. Indeed, one spouse may be considerably vexed that their credit rating has been destroyed by the other spouse’s misdeeds and may not want to have any additional damage done. However, there are some instances where it’s better for both parties to cut their losses and start fresh. But should bankruptcy still come first?
This post will provide some tips that may be helpful in answering that question.
Joint debts – Whenever debts are shared, bankruptcy (specifically a joint bankruptcy) may be helpful. If one party files for bankruptcy protection, and the other spouse does not, creditors may still have the legal right to pursue the other spouse for the balance of the outstanding debt.
Disputes over debt – When there are questions or disputes about who is responsible for paying certain debts (e.g. credit card debt, student loans) a bankruptcy may eliminate issues over who should pay what. A bankruptcy may also protect an innocent spouse if a spouse who promises to pay a debt defaults.
Consider the property implications – If spouses are trying to walk away from a property that is hopelessly underwater, a bankruptcy can help in eliminating the asset (and the debt associated with it) before a divorce is initiated.
Suffice it to say, a bankruptcy could narrow the property and debt division issues that commonly lead to protracted litigation. Of course, each couple’s situation is unique, so it is prudent to discuss your situation with an experienced bankruptcy attorney.