Divorce and Money: Should You File for Bankruptcy Before or After Your Illinois Divorce?

 Posted on January 03, 2019 in Divorce

Money troubles are not uncommon among divorcing couples. In fact, a recent study on the money habits of married couples found that finances were the main stressor in 35 percent of all relationships. Statistics also show that an alarming number of people hide debt, money, and large purchases from their significant other; as many as 7.2 million Americans are hiding money from their spouse, and approximately 6 percent of married persons say they have a secret credit card or bank account that their spouse does not know about.

Sadly, all this hidden debt and money can come back to haunt a couple that breaks down and decides to divorce. In some cases, it may even leave parties with massive amounts of debt that can only be relieved through bankruptcy. How should you proceed if this is your situation?

The answer to that question depends on a number of factors - everything from the toxicity of your current situation to you and your spouse’s income and amount of marital debt.

Understanding Why You Cannot File for Bankruptcy and Divorce at the Same Time

While it might seem easier to complete both the divorce and bankruptcy process at the same time, the courts will not allow the cases to overlap. That is because bankruptcy may require a temporary freeze or hold on your assets; the divorce process requires that you disburse those assets in an equitable manner. In short, the two processes are counterintuitive when done at the same time. As such, parties will need to decide whether they should file for bankruptcy first, or if  it might be best to proceed with the divorce process and then file for bankruptcy, independently, once the divorce has been finalized.

Filing for Bankruptcy First versus Filing for Divorce First 

When divorcing parties are in an amicable situation, it is often preferred that they proceed first with the bankruptcy process, and then the divorce. The reasoning for this is simple: filing for bankruptcy first simplifies the divorce process and saves the parties money because they are filing jointly, rather than individually.

However, there are many situations in which it may not be appropriate to wait for the divorce. Examples might include situations involving domestic violence or the abuse of a child. Whatever your decision, it is important to ensure that you have a seasoned attorney on your side, protecting your interests during the divorce settlement process, and while negotiating with your creditors.

Contact Our Wheaton Family Law Attorneys

If debt is mounting and your relationship is ending, Stock, Carlson & Asso. LLC is the firm to trust. Backed by more than 40 years of experience, our DuPage County divorce lawyers can help you determine which divorce path may be most appropriate for your situation. Call 630-665-2500 and schedule your consultation to get started.

Sources:

https://www.cnbc.com/2015/02/04/money-is-the-leading-cause-of-stress-in-relationships.html

https://www.cnbc.com/2015/01/21/iding-money-from-spouses.html