Divorce and bankruptcy are two of the most stressful processes that anyone can go through. After infidelity, most divorces result from money issues. Financial hardship is the second greatest reason for obtaining a divorce attorney in Montgomery or wherever you live. According to these statistics, many couples who intend to divorce may also be in financial positions that necessitate filing for bankruptcy. Therefore, filing for divorce and bankruptcy can definitely become a grueling and overwhelming process.
What are the different types of bankruptcy?
There are generally two types of consumer bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 is the most widely used type of bankruptcy. Here, the filing party pays off their debt by liquidating their assets. Chapter 13 allows you to keep your assets while negotiating a more manageable repayment plan with creditors. However, you must have adequate money to make the payments and be under the maximum overall debt restrictions. 
Now the main issue comes whether to file divorce before bankruptcy or file bankruptcy before the divorce or just file them altogether. So, let’s see the advantages and disadvantages of filing all of these three.
Filing divorce before bankruptcy
Most individuals file for divorce before bankruptcy when they don’t qualify for Chapter 7 bankruptcy. This happens when you and your spouse’s combined income is too high to be eligible for Chapter 7 bankruptcy. In that situation, you and your spouse may wish to postpone filing for bankruptcy until after your divorce is completed so that you can both get speedy discharges of your unsecured obligations.
If you want to retain some of your property, filing for Chapter 13 would be advantageous. Chapter 13 cases can take a few years (or longer) to conclude and filing for divorce first means you won’t have to deal with your ex-spouse in your bankruptcy case because both of you will have to file bankruptcy separately, given that both of you have adequate incomes to handle it. This is especially significant if you and your spouse don’t get along well.
In addition, if your spouse and you both need to file for bankruptcy, waiting until after your divorce is over means that each of you will have to pay your filing fee for your bankruptcy petitions, which means that you will end up having to pay more legal fees in the end.
Filing bankruptcy before divorce
There are a lot of benefits to filing for bankruptcy before getting divorced. One of them is the chance to cancel joint marital debts that would have to be split up during divorce proceedings and then dealt with in each person’s bankruptcy. A joint bankruptcy filing requires both spouses to work together, but it can speed up the divorce process and save both of them money and time.
You and your spouse could save a lot of money by hiring the same Birmingham bankruptcy lawyer for both of you. Most of the time, couples who go this way can save or salvage their money and things.
It is better to file for Chapter 13 bankruptcy in cases like this if your joint income does not pass the mean test for Chapter 7 bankruptcy. However, you will have to face and work with your ex-spouse for as long as your bankruptcy lasts.
Filing divorce and bankruptcy at the same time
While filing for an uncontested divorce and bankruptcy simultaneously is possible, it might result in unnecessary delays and issues in both cases. Before filing for divorce and bankruptcy, you should know that the two processes are unlikely to occur simultaneously. Legal motions can be filed concurrently, although, in most countries, one lawsuit takes precedence over the other.
If both cases are underway at the same time, bankruptcy is usually postponed until the divorce court allocates marital debts and assets to each side.
When you file for bankruptcy, virtually all of your non-exempt assets are transferred to the bankruptcy estate. As long as your bankruptcy hasn’t been finalized, the family court judge can’t divide and distribute your assets during a divorce. This can delay the bankruptcy procedure, and unresolved alimony or child support difficulties can also hinder it.
It’s essential to plan ahead for both your bankruptcy and your divorce; this will make them easier to handle and cheaper. You might want to file for bankruptcy before or after you get divorced, and this depends mainly on where you live, how much property and the debt you have, and what kind of bankruptcy you want to file, among other things.
Ways to protect your credit after the trial
Your finances and credit score are likely to be in bad shape after filing for bankruptcy or divorce, or both at the same time. Both divorce and bankruptcy take a heavy toll on your finances.
The first thing that you should do is to get your credit report. Examine it to make sure there are no errors. You still are responsible for all or any joint accounts that are in your and your ex-spouse’s name, and if by any chance your ex-spouse doesn’t pay, lenders will put that on your credit report. Because of this, your credit score may be hurt, and you may not be able to get new individual credit cards after the divorce.
Next, you start budgeting, make sure you are saving enough money to make paying off your debt more manageable. Cut off anything that becomes a significant burden on your credit score, for example, trade-in your expensive car for something economical and efficient or move into a smaller home that is cost-effective.
Now you can slowly start paying off your debt. You can begin making monthly payments; you mustn’t miss any charges, or it will negatively affect your credit score. If possible, join a debt consolidation program; it’s the best way to consolidate credit card debt, and it will help you be debt-free in a more systematic way.
Also, see if you can qualify for a low-limit credit card and use it only to get the necessary items. If you can’t get a regular credit card, get a secured credit card. Your credit limits are set by how much money you put into the account.
For example, if you put up $300, your credit limit will be $300. This way, you will show that you are a good credit manager if you change things and pay on time. People who lend money aren’t very trusting, so this method takes time and patience. But it’s a great way to get your credit-building back on track.
Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, and now serves as a principal attorney for the Oak View Law Group in California. He has contributed to publications such as Entrepreneur, All Business, US Chamber, Finance Magnates, Next Avenue, and many more.