Divorce and Bankruptcy
If you have decided to separate or divorce your spouse in Utah, and you are burdened with debts and obligations, you should be aware of your options. Not only must you decide whether to divorce your spouse (a difficult step in itself), but you must decide how to divide your debts and obligations. It may be that you and your spouse each agree to pay one-half of the debts and obligations (a common result), and it may be that you file a bankruptcy to discharge your debts.
Before making a decision, call us at Atticus Legal Group (801) 784-0529 and let us give you a FREE consultation. Together, we can determine what your best option is when going forward in a divorce or bankruptcy.
In this article, we will briefly describe the benefits of filing for divorce before a divorce, after a divorce, and (if necessary) during a divorce.
If you decide you need a bankruptcy and a divorce, you should understand that it is generally better to file for bankruptcy before or after you undergo a divorce, but not during a divorce. A divorce is emotionally draining, and so is a bankruptcy. Undergoing both a bankruptcy and a divorce may create confusion in each action (for example, alimony in divorce is based off "need" and a bankruptcy can artificially lower monthly expenses or increase an ability to pay).
The advantages of filing for a bankruptcy with your spouse, before undergoing a divorce, is fairly clear. After your debts have been discharged, you can proceed with a divorce with a clean slate. Both you and your spouse can divide assets equitably, without also having to worry about the pain of the debts. The disadvantage, of course, is that it can become difficult to determine a fair alimony and asset division in the anticipated divorce.
The advantages of filing for a bankruptcy after a divorce can be a little harder to understand, but no less important. The spouse who takes on certain debts in a divorce can offset those debts in other subjects of the divorce. For example, if the debts are in your name only, and you can "take responsibility" for them in exchange for some other benefit (less alimony, more assets, etc.), you will want to discharge them after the divorce is filed.
If you must file for bankruptcy while undergoing a divorce, there are certainly advantages. Filing for bankruptcy creates an "automatic stay" to protect you (and possibly your spouse) from creditors who are collecting your income. Given a divorce is expensive, and muddy finances can only exacerbate the difficulties in a divorce, an automatic stay can open your income to paying for your needs rather than overwhelming debts.
While you should avoid going through a divorce and a bankruptcy simultaneously, you should understand that each action can and will affect the other. The assets you receive in a divorce may determine whether you wish to file a bankruptcy under chapter 7 (discharge all debts, removal of assets) or chapter 13 (payment plans for assets). The bankruptcy you undergo may determine whether you pay or receive alimony or whether you have assets to divide.
Schedule an appointment and see why Atticus Legal Group is the first choice of Law firm in Salt Lake City and surrounding cities throughout the state of Utah. Call Atticus Legal Group today at (801) 784-0529.