Should I File for Divorce or Bankruptcy First?

Many couples in Michigan cite financial problems in the marriage as a primary reason for considering divorce. At the same time, those same financial problems often lead individuals or couples to consider filing for bankruptcy. If you are thinking about filing for divorce and you are also considering bankruptcy, which should come first? This is a complicated question, and it largely depends upon your individual situation. According to an article in Divorce Magazine, one of the most important things to keep in mind is that you should avoid filing for divorce and bankruptcy at the same time. When two complicated legal issues like divorce and bankruptcy overlap, it can be extremely overwhelming. As such, you should file one before the other.

What considerations should you take into account when determining whether to file for divorce or bankruptcy first?

Does Your Spouse Also Plan to File for Bankruptcy?

One of the first questions to ask yourself when deciding whether to file for divorce or bankruptcy first is whether your spouse also plans to seek bankruptcy protection. While many people assume that a married couple shares all finances and thus that both parties would plan to file for bankruptcy if one of them was planning to do so, this is not necessarily the case. If your spouse is not planning to file for bankruptcy, it could make more sense to go through with your divorce before you consider your personal bankruptcy options.

If your spouse is planning to file, however, and the two of you are still on relatively collegial terms, filing a joint petition for bankruptcy may save you money in the long run. First, you will only pay one bankruptcy filing fee, and you will only pay attorneys' costs once for your bankruptcy (as opposed to twice if the two of you file individually). In addition, if you are planning to file for Chapter 7 bankruptcy-liquidation bankruptcy-you could have your marital debts discharged before it is time to divide marital property in your divorce.

At the same time, however, there are also some downsides to filing for bankruptcy prior to filing for divorce. While some states allow a married couple filing a joint bankruptcy petition to double exemptions such as the homestead exemption, Michigan is not one of those states.

Which Type of Bankruptcy Protection Do You Plan to Seek, and Are Your Debts Dischargeable?

Two other important questions for determining the order of divorce and bankruptcy are:

  • Do you plan to file for Chapter 7 or Chapter 13 bankruptcy?; and

  • Are most of your debts dischargeable?

If you are planning to file for Chapter 7 bankruptcy, like we mentioned above, this option can allow you and your spouse to quickly discharge many debts and then file for divorce relatively soon afterward. If you plan to file for Chapter 13 bankruptcy, however, you should keep in mind that this "reorganization bankruptcy" means that you could be tied to your spouse for three to five years before debts are discharged and you can file for divorce. Otherwise, you could end up with a very complicated financial situation.

In addition, before you even think about filing for bankruptcy with or without your spouse, you should ensure that the majority of the debts you hope to have discharged are, in fact, dischargeable. For example, child support payments that are owed from another relationship can never be discharged in bankruptcy, nor can alimony or spousal support payments you owe.

Learn More from a Michigan Divorce Lawyer

If you need help considering your divorce options and your timeline, you should speak with a Michigan divorce attorney as soon as possible. Contact the Law Offices of Michael A. Robbins for more information.