For many couples contemplating divorce, the topic of bankruptcy is regularly considered. This is because financial problems are often ranked as the highest stressors in a marriage. When discussing solutions for money issues, bankruptcy is sometimes explored as a way out. In fact, Planning ahead can make both a bankruptcy and a divorce less complicated and more cost effective.
Whether you should file a bankruptcy before or after a divorce depends on many factors such as how much property and debt you have and what type of bankruptcy you wish to file.
Chapter 7: The goal for individuals who file Chapter 7 is to free themselves of debt through a bankruptcy discharge. Although businesses normally do not receive a discharge, corporations and partnerships may use Chapter 7 to liquidate and close their business.
Chapter 11: Corporations, partnerships, and sole proprietors wishing to remain in business and reorganize their financial affairs may file Chapter 11. These debtors seek to restructure their debts, either by reducing the debt or by extending the time to repay. A Chapter 11 plan can also be used to liquidate all or a portion of a debtor’s assets.
Chapter 13: Chapter 13 is for individuals with regular income who want to reorganize their financial affairs. The debtor proposes a repayment plan, say to catch up on the arrears on their home mortgage. Only individuals and sole proprietors are eligible for Chapter 13, which is simpler and much less expensive than a Chapter 11.