If you're in a dire financial situation, a bankruptcy can give you the chance to make a fresh start. If your bankruptcy also coincides with the dissolution of your marriage, you need to take extra precautions to legally protect yourself.
Here are some of the ways a bankruptcy lawyer can protect you when a bankruptcy coincides with a divorce.
Chapters and Debts
Choosing the right type of bankruptcy to file for your situation should also include considering the types of debts you're looking to escape. Your bankruptcy lawyer can walk you through your options to help you develop a solid legal plan.
Most individuals file for either Chapter 7 or Chapter 13 bankruptcy. There are some major differences between these two options. Chapter 7 bankruptcy essentially forgives your debts in exchange for liquidating the bulk of your assets. This means giving up your house, selling off your stocks, auctioning off your collectibles, and cashing out your savings accounts. The major benefits of Chapter 7 bankruptcy is that your debts are mostly forgiven and it's quick. However, your credit and your assets will wiped away in the process. Chapter 13 bankruptcy gives you the chance reorganize your debts. However, your credit will still be compromised, the process can be lengthy, and your debts will not be entirely forgiven.
For clients looking to file for divorce and bankruptcy in the same year, you'll need to balance the ratio of your debts to your assets. If your debts are larger than your assets, particularly after you're forced to divide them with your spouse, Chapter 7 is likely your best bet. If you own a business or own potentially valuable assets, Chapter 13 could be the right choice. You should also remember that bankruptcy does not forgive obligations to pay alimony, child support, and other types of federally insured loans.
Dividing and Filing
When it comes to filing for bankruptcy, you'll need to consider how you intend to divide your assets and debts.
Your bankruptcy lawyer can help negotiate more favorable terms if they're able to swap assets and debts with your creditors and ex-spouse. For instance, your bankruptcy lawyer might help you negotiate with your credit card company to forgive your debts in exchange for making monthly payments without interest. Your bankruptcy lawyer can also help you make trades with your ex-spouse to increase your debt to asset ratio to make your bankruptcy filing more profitable.
For more information, consult a bankruptcy attorney.Share