If you find yourself dealing with both bankruptcy and divorce in New York, you are not alone. Many individuals face these two significant life events at the same time, which can feel overwhelming. The question of what comes first – bankruptcy or divorce – is one that many individuals ask themselves, and for good reason. How you approach both can have lasting consequences on your finances, your future, and even your relationships. In this blog, we will explore the key factors to consider when deciding whether to file for bankruptcy before or after divorce, as well as how these decisions may affect the division of assets, debt obligations, and the long-term financial stability of both parties.
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Should You File for Bankruptcy Before or After Divorce? 
When you are dealing with both bankruptcy and divorce, the decision of which to address first is influenced by a variety of factors. While each person’s situation is unique, understanding the legal and financial implications of both processes will help you make an informed decision. Bankruptcy and divorce are both intricate processes in their own right, and they can intersect in ways that are difficult to predict. In general, there are both advantages and disadvantages to filing for bankruptcy before or after divorce. Understanding these will help guide your choice.
Advantages of Filing for Bankruptcy Before Divorce
One of the primary reasons individuals choose to file for bankruptcy before divorce is the potential to simplify the division of debts. If you and your spouse share significant debt, such as credit card bills, medical expenses, or personal loans, filing for bankruptcy together can eliminate much of that debt before dividing up your assets. This can reduce the number of debts that need to be discussed and divided during the divorce settlement, which could lead to a faster, more straightforward divorce process.
Filing for bankruptcy before divorce may also allow you to protect joint assets that might otherwise be vulnerable in the divorce settlement. If you are able to eliminate debts through bankruptcy, your financial situation going into the divorce may be clearer, which could make it easier to negotiate the terms of the divorce. For example, you may avoid the need for one spouse to take on an excessive share of the debt, which might otherwise complicate the division of property.
Potential Downsides to Filing for Bankruptcy Before Divorce
While filing for bankruptcy before divorce can help clear some of your debt, it’s important to understand the potential drawbacks. For one, filing for bankruptcy can delay the divorce process. When you file for bankruptcy, an automatic stay is put in place, which temporarily prevents creditors from making claims against you. This may also delay or complicate the division of assets in the divorce, particularly if there are questions about the discharge of certain debts or assets.
Another downside is that certain debts, such as child support and alimony, are not dischargeable in bankruptcy. If you expect to owe a significant amount in spousal support or child support, filing for bankruptcy won’t eliminate these financial obligations. Additionally, your attorney will need to carefully consider the impact of the bankruptcy filing on any property settlements, as it could affect the value of certain assets.
Filing for Bankruptcy After Divorce: Key Considerations
In some cases, individuals choose to wait until after the divorce to file for bankruptcy. This approach can have its own set of advantages. For instance, by filing for bankruptcy after the divorce is finalized, each spouse’s financial responsibilities are clearly separated. This can be particularly helpful when it comes to dividing debts that are associated with one spouse’s individual name. If the divorce is finalized first, it may be easier to handle any remaining debt in a way that clearly distinguishes what belongs to each party.
If you file for bankruptcy after the divorce, you are also less likely to deal with the complications of splitting certain marital assets that might otherwise be impacted by a bankruptcy filing. For instance, if the bankruptcy is filed jointly before the divorce, it could have an effect on property division. However, if the bankruptcy is filed after the divorce is finalized, you and your spouse are free to separate your finances without worrying about the long-term impact on the division of marital property.
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Risks of Filing for Bankruptcy After Divorce
On the other hand, filing for bankruptcy after a divorce could result in a more complicated process when it comes to dividing property and debts. If you and your spouse have joint debts, bankruptcy could still affect your ability to negotiate certain settlements. It may also delay the process if there are significant debts involved that must be dealt with separately.
Moreover, if you wait to file for bankruptcy until after the divorce, it can become more difficult to discharge debts that were incurred during the marriage. Any debts that are associated with joint accounts may remain in place unless they are specifically addressed in the divorce settlement. This can make it harder to come to a fair and final resolution, particularly if one spouse is left with significant debt that they are unable to discharge.
Child Support and Alimony: The Non-Dischargeable Debts
Regardless of whether you file for bankruptcy before or after divorce, it’s important to note that child support and alimony are not dischargeable in bankruptcy. This means that even if you file for bankruptcy, you will still be legally required to fulfill any child support or alimony obligations outlined in your divorce settlement. These financial responsibilities are separate from other forms of debt, and bankruptcy will not provide relief from them.
If you are concerned about the impact of child support or alimony on your bankruptcy case, it is crucial to consult with an attorney who specializes in both bankruptcy and family law. Your attorney can help you understand how these obligations will be handled and ensure that you are fully prepared for the financial challenges that lie ahead.
Consulting Legal Professionals: The Importance of Expert Advice
Given the complexity of both bankruptcy and divorce proceedings, it is essential to seek guidance from legal professionals who specialize in these areas. An experienced bankruptcy attorney can provide valuable insights into how filing for bankruptcy may impact your divorce and vice versa. Similarly, a knowledgeable divorce attorney can help you understand how your financial situation will be impacted by the bankruptcy process.
At Cole, Sorrentino, Hurley, Hewner & Gambino, P.C., our team of legal professionals are here to help guide you through the difficult process of navigating divorce. With years of experience in divorce law, we can provide personalized advice that aligns with your unique financial and legal situation.
When dealing with divorce in New York, it’s essential to carefully consider the timing of each process. Whether you file for bankruptcy before or after your divorce will depend on many factors, including your financial situation, your marital assets, and your legal goals. By consulting with experienced professionals and understanding how each process will impact the other, you can make a decision that best serves your long-term financial and legal interests.
Remember that bankruptcy cannot discharge child support or alimony obligations, and understanding how these will be handled is an important part of planning your financial future. Ultimately, by working with the right legal team, you can navigate the complexities of divorce with confidence.