While going through a divorce can cause people to have to file for bankruptcy later, in some cases, couples struggling with a lot of debt may be facing bankruptcy and divorce, wondering whether there is an advantage to filing for one before another.

The short of it is that it will depend on the specifics of a couple’s financial situation, as well as their needs and goals. This is because there are a few important considerations, which we’ll discuss below, that can affect whether filing for divorce or bankruptcy first is more advantageous.

Divorce or Bankruptcy First? Here’s What to Consider…

  1. Thinking about these 3 things can help you start to figure out whether it’s better for you to file for divorce or bankruptcy first, a Denver divorce & family lawyer explains.

    Thinking about these 3 things can help you start to figure out whether it’s better for you to file for divorce or bankruptcy first, a Denver divorce & family lawyer explains.

    The type of bankruptcy case you intend to pursue – If you intend to file for Chapter 7 or Chapter 13 bankruptcy, it may be preferable to file for divorce first. This is because, with Chapter 7 bankruptcies in Colorado, you have to pass a means test; if you file for bankruptcy jointly (i.e., before you divorce), your income and your partner’s will be used in the means test. This can cause you not to pass the means test (due to having too much income). If you divorce first, however, only your income will be counted, and this can help you qualify for discharge via Chapter 7 bankruptcy.

    With Chapter 13 bankruptcy, it can take at least three years to resolve these cases. Again, this may mean that you want to get divorced first so you can deal with bankruptcy – and not a flailing (or unhealthy) marriage – for the next few years.

  2. Colorado bankruptcy exemptions – Before you move forward with anything, however, another important consideration is whether you and your partner could benefit from any of the doubled Colorado bankruptcy exemptions (for spouses). If so, you and your partner may be able to keep more of your assets through bankruptcy. While this won’t apply to your home, it may affect your vehicles and other assets.
  3. Property division issues in divorce – Although there seems to be a few viable reasons to divorce before bankruptcy, there are benefits to pursuing bankruptcy first, particularly when it comes to property division matters in divorce. In fact, when couples have a lot of debt, clearing up these debt issues before divorce (via bankruptcy) will mean that this won’t need to be an issue in the divorce case. This can simplify the division of property and may end up facilitating the divorce case, which could then result in it being cheaper to resolve.

Need help figuring out whether to proceed with a divorce or bankruptcy first? If so, let’s talk…

Contact a Denver Divorce & Family Lawyer at the Law Office of Bruce H. Rabun, LLC

Contact Denver Divorce & Family Lawyer Bruce H. Rabun for caring, aggressive representation and the highest quality legal services when you are ready to proceed with divorce.

Call our firm at (303) 221-7899 or email us using the contact form on this page to schedule an initial consultation and find out more about your best options for moving forward. From our office in Centennial, we represent people throughout the Denver metro areas, Arapahoe County, Douglas County and Jefferson County.

Categories: Planning/Preparing for Divorce