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When should you wait to declare bankruptcy?

On Behalf of | Dec 21, 2015 | Bankruptcy

Some spouses in Virginia may be understandably concerned about whether it is best to declare bankruptcy before or after they are divorced. The answer to this question can often vary depending on their specific marital circumstances.

In many of these cases, the amount of debt the parties share will need to be reviewed. For example, in cases where one party holds significantly more assets than his or her partner, it may be advisable to consider a separate bankruptcy filing to seek relief from overwhelming debt. Since the court might well add together the assets of both parties, the party with fewer assets may find themselves unable to discharge their bankruptcy due to their partner’s assets. In addition, both parties will need to agree to a bankruptcy before it can be filed, which might be difficult to arrange in cases where substantial amounts of conflict exist in the marriage.

The important thing to remember about how bankruptcy relates to divorce is that the income and assets of the couple as a whole might be taken into account. A Chapter 7 bankruptcy filing may be impossible if one party makes too much money. Similarly, bear in mind that bankruptcy might complicate the property redistribution process during a divorce if jointly owned assets are ceded to the bankruptcy estate.

Given the inherent complexities involved in this issue, someone who is considering whether to declare bankruptcy before or after a divorce might wish to discuss the matter with a lawyer. A lawyer can sit down with his or her client to thoroughly review the specifics of the marital situation in order to help them decide upon a viable plan. In this way, it may be possible to work toward an optimal solution for both parties.