Some life-altering events can trigger bankruptcy, and a divorce is one of those events. Depending upon certain factors pertaining to the divorce process, the effects of bankruptcy may vary.
In order to make the best decision, spouses should seek to understand the various aspects of bankruptcy. There are a few key things to know about pursuing bankruptcy during divorce.
Timing matters
Where two people are in the divorce process determines the bankruptcy procedure, including whether a party may file for one at all. For instance, if someone wants to file for bankruptcy during the divorce, a bankruptcy trustee must approve it. Should the trustee provide the approval, the bankruptcy must be completed before the divorce proceedings continue.
On the other hand, should a party decide to file for divorce while a bankruptcy is in process, the divorce would change the individual’s income and therefore require altering the bankruptcy arrangement. Either way, parties should be aware of their right to property in accordance with the laws of the state of Pennsylvania so that they know what to expect in regard to division of property. For those who seek a bankruptcy after divorce, the decrease in income could warrant a decrease in spousal or child support.
Compare filing types
Spouses may choose to file for bankruptcy jointly or as an individual. A joint filing tends to be most beneficial for those parties who share a large number of assets or a few high-value property items, such as homes or land. For those who do not have such property, when the other spouse owes most of the debt, filing separately may help to alleviate any unnecessary burden.
These are brief overviews of a few key concepts. It may be beneficial to speak with an attorney to ensure the selection of the best possible option. An attorney is knowledgeable and will be able to explain the various choices and the possible impact.