As the number one bankruptcy filer in the State of New York, Jacoby & Jacoby has helped countless clients find financial freedom through bankruptcy. Ready to escape tremendous debt? Schedule a free consultation online to speak with a top bankruptcy attorney today.
Are you facing the possibility of going through divorce and bankruptcy at the same time? Take it from the number one bankruptcy filer in New York: You will almost certainly need legal guidance to navigate this coming storm successfully.
That’s because divorce and bankruptcy are both life-altering events, even when they happen on their own. They each require numerous financial and emotional considerations, so when they occur in tandem, the resulting complexities can be overwhelming.
If you’re facing both bankruptcy and divorce, you need a comprehensive strategy that addresses the issues that will arise in their intersection. An experienced bankruptcy attorney can be the knowledgeable advocate you need to ensure all of your financial bases are covered. Luckily, you don’t have to search too far.
As premier bankruptcy attorneys serving New York, the team at Jacoby & Jacoby is up to the task. After a thorough review of your case, we’ll design a thorough strategy that accounts for every meaningful factor so that you can move forward with your life from the best possible financial standing.
Ready to learn more? This article will explain everything you need to know about bankruptcy and divorce, including crucial considerations, timing, property divisions, types of bankruptcies that can be filed during divorce and more.
Understanding Bankruptcy in New York
Most people associate bankruptcy with failure and financial ruin, but the truth is almost the opposite. In reality, bankruptcy is an effective way for people who’ve amassed insurmountable debt to get a fresh financial start. Although there are several types of bankruptcy, the two most frequently used are Chapter 7 and Chapter 13.
The most commonly filed type of bankruptcy is Chapter 7 (also referred to as “liquidation bankruptcy”), which is intended for people experiencing financial hardship. Its purpose is to eliminate all unsecured debt, which may include credit card debt, personal loans, school tuition, medical bills and more; however, not all debts are eligible for discharge.
Chapter 13 (also called “reorganization bankruptcy” or a “wage-earner’s plan”) is designed for people with regular income. Its purpose is to reorganize debt in a way that allows people to repay some or all of it in installments, typically over three to five years. In doing so, it helps borrowers retain major assets like their cars and homes while still chipping away at their debt.
Wondering what all of this has to do with divorce? Whether or not you realize it, the type of bankruptcy you file for can have significant implications for your divorce proceedings, and vice versa.
The Intersection of Bankruptcy and Divorce
When strategizing for bankruptcy and divorce, it’s essential to understand their intersection. Numerous considerations must be made, which is why it’s smart to strategize with a legal professional. Some of the most important ones include timing, property division and spousal and child support.
Timing: Deciding When to File
If both spouses are overwhelmed by debt and decide to file for bankruptcy jointly before starting divorce proceedings, they’re able to eliminate shared debts and make the subsequent divorce less complicated. However, filing for bankruptcy jointly isn’t always possible, especially if they don’t meet New York residency requirements.
Filing for bankruptcy after getting divorced is typically the more challenging option, in part because it considers individual incomes and expenses rather than combined household finances. Additionally, spouses may agree to take on specific debts in their divorce decree, but creditors aren’t bound by this contract; they’ll pursue whoever has their name on the debt, which can impact the credit score and financial obligations of that individual.
New York follows the principle of equitable distribution, meaning that assets and debts are divided fairly but not necessarily equally between spouses. Property division becomes more complicated when bankruptcy comes into play, as certain bankruptcy and divorce laws intersect.
For example, if one spouse files for Chapter 7 bankruptcy, the bankruptcy trustee may liquidate non-exempt assets to repay creditors. However, doing so could greatly impact the distribution of assets during divorce. Similarly, a repayment plan created under Chapter 13 is designed to pay off debts over time. This could affect property division if it allocates a portion of the debtor’s income toward repayment.
Spousal Support and Child Support
It’s important to understand that bankruptcy cannot discharge certain debts, specifically child support and alimony. These obligations are considered priority debts and cannot be eliminated through any type of bankruptcy.
Types of Bankruptcy in Divorce Scenarios
The type of bankruptcy that can be pursued during divorce depends on a variety of factors, including the nature of the debts, each spouse’s income and each spouse’s ability to repay their debts. Here are a few of your potential options:
- Joint bankruptcy. In some cases, spouses can file a joint bankruptcy petition before or during divorce proceedings. This option is typically available in cases where both spouses are facing overwhelming debt and prefer to address it collectively.
- Individual bankruptcy petition. One spouse may choose to file an individual bankruptcy petition when only one spouse has significant debts and financial obligations.
- Separate Chapter 7 Bankruptcies. In some cases, each spouse qualifies for their own Chapter 7 bankruptcy, but this option is only pursued when both have considerable individual debts. It’s important to note that this option will likely require more paperwork and documentation, as well as separate filing fees and legal costs.
Navigating the complexities of bankruptcy and divorce simultaneously is likely to be overwhelming, regardless of which options you choose. However, working with a qualified New York bankruptcy lawyer can make the overall process much smoother.
Jacoby & Jacoby: Premier Bankruptcy Attorneys in New York
When you’re going through a traumatic event, your capacity is limited. You’re not going to be able to remember every important detail or complete every task alone—and you shouldn’t have to. Luckily, our compassionate team of bankruptcy attorneys is here to help.
In an assessment of your financial situation, we’ll help identify non-dischargeable debts and analyze asset division. We’ll coordinate with your divorce lawyer to ensure your best interests are being looked after and that no detail is left out. Finally, we’ll help you file the necessary paperwork and represent you in court.
Ready to get started? We make it easy: Simply contact us online to schedule your free consultation or give us a call at (888) 452-2629.