Bankruptcy and Divorce: Which Should Come First?

Bankruptcy and Divorce: Which Should Come First?

If you are facing bankruptcy and an impending divorce, it’s a lot, and you may have no idea which legal matter to focus on first. Fortunately, there are several guidelines that can help you make the right choice for you, and working closely with an experienced Michigan divorce attorney from the start is in your best interest. 

Considering Bankruptcy

Bankruptcy isn’t something most of us want to pursue. If, however, you’re already experiencing crushing debt or you expect your divorce to leave you with serious debt, bankruptcy can provide you with a fresh financial start and may be the best option. In fact, divorce is often the impetus behind bankruptcy. A better understanding of how the timing of bankruptcy can affect the outcome of your divorce can help you make well-informed decisions.  

Filing Prior to Divorce

Filing for bankruptcy prior to divorce can be a good option. To begin, it can help lessen the friction between you and your divorcing spouse, which – in turn – can help your divorce proceed more smoothly. Since bankruptcy will discharge much of your debt, filing prior to divorce means you can forego negotiations related to assigning the debt to each spouse. The fact that you’re married also allows you to file jointly, which can save on all the following primary expenses:

  • The associated court filing fees
  • The associated credit counseling fees 
  • The associated attorney fees

These can add up to a significant amount.

Filing for bankruptcy while you’re married also allows you to take advantage of specific exemptions, which refer to assets that are exempt from the bankruptcy process. The State of Michigan offers a special exemption that applies only to married couples, which may make filing early to your advantage. 

Filing during Divorce

Filing for divorce while your divorce is pending can slow the divorce process, and this applies primarily to the division of your marital property. Once you file for divorce, all your assets – whether separate or marital – become the property of the bankruptcy estate. As such, your divorce may be stalled until your bankruptcy is finalized, which can be a lengthy process. While this generally isn’t a great option, it may be your only option if your divorce is dragging on with no end in sight.

Filing after Divorce

There are some excellent reasons for filing for bankruptcy after divorce. For example, if your combined marital assets don’t qualify for Chapter 7 bankruptcy, you may qualify once you become single – based on the means test. Filing after divorce can also increase your exemptions, which means you’ll lose fewer of your financial assets.  

Discuss your Bankruptcy Concerns with an Experienced Michigan Divorce Attorney Today

The distinguished Michigan divorce attorneys at Aiello & Associates have the knowledge and experience to help you navigate bankruptcy and divorce in the manner that best protects your financial rights in your unique situation. To learn more about how we can help, please don’t hesitate to reach out by contacting us today. 

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If you are facing a tough legal issue, the decisions you make now can affect you for the rest of your life. That’s why it’s important to seek the help of an experienced and aggressive lawyer.
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Chris Aiello



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