Bankruptcy & Divorce: What You Need to Know
June 8, 2022
Dealing with bankruptcy and divorce can be stressful and overwhelming. If you're considering divorce and going through financial distress, you may be wondering whether to file for bankruptcy before or after finalizing your divorce. An experienced Oregon bankruptcy attorney can enlighten you about how bankruptcy and divorce affect one another and determine the best course of action.
At Oregon Fresh Start, I have the diligence, resources, and expertise to advise and guide consumers in complex bankruptcy matters involving divorce. I'm available to discuss your unique situation, enlighten you about the benefits of filing for bankruptcy before or after your divorce, and help determine what is right for your unique financial situation. My firm is proud to serve clients across Bend & Hermiston, Eugene, and Portland, Oregon.
In Oregon, couples who are legally married are eligible to file their bankruptcy petition together – jointly. This is known as "joint bankruptcy." Here are some benefits of joint bankruptcy filing in Oregon:
Filing jointly eliminates the general unsecured debts of you and your spouse.
Filing jointly reduces the issues that will be settled in the divorce court.
The whole bankruptcy proceedings can be streamlined easily.
Filing jointly helps save attorney fees and court costs.
Filing jointly gives you twice the number of exemptions.
Filing jointly is more efficient and convenient since both spouses will file only one bankruptcy petition.
You and your spouse can keep more assets and property.
However, filing jointly will negatively affect the credit rating of both spouses. Also, if the other spouse recently filed for bankruptcy, only one spouse may be eligible to file again.
Furthermore, married couples in Oregon may still be allowed to file for bankruptcy as an individual or simultaneously as separate entities. Here are some of the benefits of filing bankruptcy separately or as an individual in Oregon:
Filing separately eliminates some of the general unsecured debts of the indebted spouse.
Filing separately can help protect more assets and property.
The separate property of the non-filing spouse isn't affected.
Filing separately helps preserve the good credit rating of the non-filing spouse.
In the event that the indebted spouse needs bankruptcy protection immediately, filing separately might be the ideal option. An experienced attorney can help determine whether to file for bankruptcy jointly or individually and enlighten you about which should come first between bankruptcy and divorce.
Which to File First
Here are some factors to consider when determining whether to file for bankruptcy before or after divorce:
How High Is Your Joint Income?
If you intend to file for Chapter 7 bankruptcy, your income must be less than the Oregon median income for your household size in order to qualify. Hence, if your joint income is higher than the state's median income, filing for divorce first may be right for you.
Do You Have Marital Debts?
In a divorce case, both the couple's accumulated assets and debts will be divided equitably. Filing bankruptcy before a divorce can help cancel some or all of the joint marital debts.
Are You Filing Jointly or Individually?
As mentioned earlier, filing jointly helps streamline bankruptcy proceedings and reduce attorney fees and court courts. If you want to enjoy the benefits of joint bankruptcy, you should consider filing jointly with your spouse before the divorce. However, this requires utter cooperation between the spouses.
How Can You Keep More Assets?
In addition, couples can keep more assets when they file for joint bankruptcy than when filing individually after a divorce. Hence, filing for bankruptcy as a couple before divorce may be a great idea to help keep a large portion of your assets.
An experienced attorney can help determine what option is right for you and enlighten you about how bankruptcy affects the division of assets in your divorce.
Bankruptcy help wipes out some of your general unsecured debts, thereby simplifying the asset division process in your divorce. Also, you will be left with your exempt assets, such as your primary home, motor vehicle, household appliances, clothing, and furniture pieces.
However, Oregon doesn't allow you to double the exemption. If you have more assets than can be exempted in a joint bankruptcy, filing separately after the assets and property have been divided in the divorce might make sense.
Discharge of Debt
Dividing marital debts in a divorce often presents numerous challenges. If one spouse fails to pay certain debts, their estranged partner may still be held liable for such debts. Even if you pay the debts on behalf of your ex-partner, collecting your money may require court intervention, which may be costly and time-consuming.
Therefore, in order to mitigate several potential issues with marital debts, it is in the best interest of the couples to file bankruptcy and eliminate their combined marital debts before getting a divorce. An experienced bankruptcy attorney can enlighten you about your options and help you navigate crucial decisions.
Legal Guidance You Can Trust
Dealing with bankruptcy and divorce simultaneously often involves a lot of complexities. Though, bankruptcy won't stop divorce, child support, or custody actions. However, it will delay property division until after completing the bankruptcy case. Nevertheless, with effective planning, your divorce and bankruptcy case will become less complex and more manageable. A skilled bankruptcy attorney can explore your available options and determine what is right for your personal situation.
At Oregon Fresh Start, I'm committed to providing experienced legal guidance and reliable advocacy to clients in legal matters of bankruptcy and divorce. As your legal counsel, I can evaluate the surrounding circumstances of your unique situation and help you decide whether to file for bankruptcy before or after your divorce. Also, I can enlighten you about the benefits of filing your bankruptcy petition individually or jointly with your spouse and help you navigate crucial decisions in your bankruptcy proceedings.
Contact my firm – Oregon Fresh Start – today to schedule a simple consultation with a reliable bankruptcy attorney. I have the detailed legal counsel, support, and brilliant advocacy you need to make intelligent decisions in your bankruptcy and divorce matters. My firm proudly serves clients across Bend & Hermiston, Eugene, and Portland, Oregon.