Financial problems continue to be a major contributing factor in divorce. Unfortunately for many, by the time a divorce action is filed, bankruptcy may seem the best way to put the past behind and get a fresh start. Should you file for bankruptcy before the divorce is final? Are there compelling reasons to wait until a divorce is final to file for protection under the bankruptcy laws?
If you both see bankruptcy as your only alternative, there may be some benefit to filing while you are still married. First, if you file jointly, you’ll share the filing fees and costs of bankruptcy. Furthermore, in a joint filing, you can typically double the value of property that you can exempt from the bankruptcy sale.
Dividing Marital Assets in New Jersey
Because dividing marital debt can be difficult, another advantage of filing for bankruptcy before the finalization of your divorce is that you can wipe out most debt and simplify the property settlement process. It’s important to remember, though, that an automatic stay goes into effect when you file for divorce. The automatic stay will put a hold on marital property settlement until the bankruptcy is over.
If you are considering filing for liquidation under Chapter 7, though, you need to be aware of the “means test” for qualifying to permanently discharge your debts. The means test looks at your income (joint income if you are still married) and assesses whether you have the ability to repay your creditors over a three-to-five-year period. If your goal is to eliminate, rather than restructure, your debt, you may be best-served to wait and file for bankruptcy after your divorce is final.
Contact New Jersey Divorce Litigation Lawyers at Lyons & Associates
If you are involved in a divorce containing significant assets and/or debts, it is crucial to have experienced legal counsel. Our family law firm of Lyons & Associates will guard and protect your rights and interests. Contact Lyons & Associates online or call 908-575-9777 to schedule a confidential consultation.