A common question I get in my law practice is,” should I wait until after I am divorced to file bankruptcy, or should I file bankruptcy before I file divorce?” The answer typically is that you can file your divorce and get the ball rolling, and then file a Chapter 7 bankruptcy before you finalize your property settlement, or go to trial in your divorce case. There is a six month statutory period that must pass prior to your divorce becoming final, and so most people want to get the clock ticking.
It is usually advisable to file the bankruptcy prior to finalizing your divorce for a couple of reasons.
One is that by eliminating the marital debts, you take the debt division off the table and you will not be responsible for half the debt, and the debt is not a bargaining chip for the ex.
And two, if you don't agree to pay half the debts, or if the judge doesn't order you to pay half the debts within your divorce judgment, the debts are fully dischargeable (eliminated). If you agree to pay half the debts or the judge orders you to pay half, and your marital judgment is entered, the marital debts are no longer dischargeable to the extent they would effect your ex spouse, except in extraordinary circumstances, or within a Chapter 13 payment plan bankruptcy.
If you find yourself in dire financial crisis and the divorce makes things even worse, it is advisable to consider whether or not bankruptcy is the right choice for your prior to deciding how to proceed in your divorce. Moreover, your ex spouse may want to file bankruptcy as well, and so long as your divorce isn't final, you can file jointly and save attorney costs and filing fee costs for the bankruptcy.
Bankruptcy or not, you can still go forward within your family law case in order to deal with child custody and support.
So a common strategy my office uses is to get the divorce filed; request child custody and support orders in the mean time, and file the Chapter 7 bankruptcy prior to negotiating assets and debts. In many cases, we have dealt with virtually all of the marital disputes before the bankruptcy even becomes final, and then after the bankruptcy is final, we simply put together a simple agreement with personal property, and include the existing custody and support orders within the agreement. This approach cuts right through the complications and also sets you toward a fresh start not only in your family law case but also with your finances.