Financial stress can push a marriage over the edge, but a failing marriage can also be the precursor to financial issues for both parties. If your debt is primarily composed of credit card debt, medical debt, and other personal loans, bankruptcy could be the ideal way to secure a fresh start and clear away suffocating debt payments. Adding another legal issue in the midst of a divorce can be intimidating, however. A divorce attorney can help you decide whether to file bankruptcy before or after dissolution.
Exempt Property in Bankruptcy
One important factor in bankruptcy is your exempt property. During a bankruptcy, a trustee collects all of a debtor’s nonexempt property, liquidates it, and uses it to pay off creditors. Common types of exempt property include clothing, jewelry, photographs and books, burial sites, household goods, food and fuel, life insurance, child support, and personal injury claim proceeds. There are monetary values set for each category. A married couple filing bankruptcy gets double the exemptions of a single person, however. If you and your spouse have a significant amount of joint debt, filing prior to divorce could allow you to keep more of your property. If one party carries significantly more debt than the other, filing after divorce could be more beneficial.
Marital Property Laws
As you consider bankruptcy, think about your marital property. Colorado is not a community property state. As a result, debt accrued during the marriage does not necessarily belong to both parties. Each spouse is responsible for his or her own debts. This is helpful in some ways, since it allows you to file bankruptcy without forcing your spouse to take over payments. It can also complicate some bankruptcy cases. A case that is complicated prior to divorce becomes even more complex after divorce.
Simplifying the Divorce Process
One benefit of filing bankruptcy prior to separation is how it can simplify some divorce proceedings. Perhaps you and your spouse both have an unhealthy amount of debt and you’re uncertain about how to divide it during the divorce. If division of liabilities is a contentious point in the divorce process, starting fresh with bankruptcy can eliminate these issues. Filing for bankruptcy before divorce may extend the process, since you have to wait until the bankruptcy has been granted to begin divorce proceedings. Much depends on the nature of your divorce. If you and your spouse are in agreement about most issues and are willing to work together throughout the divorce process, consider filing bankruptcy first.
There are many individual factors that complicate each divorce and bankruptcy case in Colorado. Discussing the unique aspects of your case with an attorney can help you make a decision that’s right for you and your family.
Let Us Handle Your Divorce or Bankruptcy Case
Divorce and bankruptcy are never easy, but you can minimize your stress with the services of a Colorado family attorney. Get a free consultation for your divorce and/or bankruptcy case by calling Kinnaird Law.