New Jersey residents who are headed toward divorce and who are also experiencing serious financial challenges may need to evaluate the potential of also filing bankruptcy. Faced with this prospect, it can be difficult to know if the bankruptcy should come before the divorce or if the divorce should be completed first. As Divorce Money Matters explains, there is no standard answer to this question that is right for everyone, as individual circumstances can vary greatly.
According to My Horizon, spouses might find it better to file a joint bankruptcy prior to their divorce if they are filing a Chapter 7 bankruptcy instead of a Chapter 13 plan. This is because Chapter 13 plans last for up to 60 months, keeping people financially bound to each other for a long time. A Chapter 7 plan can be completed with much less complexity and in a much shorter period of time. However, there is the danger that a joint household income would be greater than what is allowed under a Chapter 7 plan. This should be assessed before a final decision is made.
Another benefit to a joint filing before a divorce is initiated is a reduction in overall bankruptcy fees. Exemptions can also financially benefit couples as joint exemption amounts are greater than those allowed for individual bankruptcy filers.
Perhaps one of the biggest contributing factors that would dictate when to file a bankruptcy relative to a divorce is how well the spouses are able to work together on a bankruptcy. If they can remain amicable throughout the process, a joint filing may work. If, however, there is a large amount of conflict and disagreement, it may be better to pursue individual bankruptcies after a divorce has been completed.