Divorce is an overwhelming stressful event in most people’s lives, and financial difficulties are one of the leading causes of marital failure. According to Robert J. Harris, a divorce attorney, “There are two situations we see most often. First, where the marriage is in difficulty because of financial problems; and second, where the parties know that the dissolution will result in overwhelming financial hardship, and a bankruptcy is an integral part of the dissolution process.”
Neither of these is a happy situation, but a joint bankruptcy before the divorce can greatly reduce the stresses associated with the division of assets and liabilities. Only married people can file a joint bankruptcy, but if the spouses wait until they are divorced, each has to file for bankruptcy alone, which means two filing fees and two lawyer fees. Bankruptcy before divorce is especially appealing when the majority of the debt obligations are in both names.
Divorcing couples should remember that they now face a landslide of costs they did not have when married. Besides lawyer and court costs, the former spouses now face the expenses of two households rather than just one, and when one spouse must now find a new job, childcare costs may come into play.
A creditor is not a party to a divorce agreement, so both spouses are responsible for joint debt even when only one goes bankrupt. Joint filing before your divorce sidesteps many of the headaches associated with the division of assets and debts because most of this will have been settled by the bankruptcy proceedings, not the divorce court.
Yes, bankruptcy and divorce sometimes go hand-in-hand, but with proper management one can be used to reduce the dislocation caused by the other.