Going through bankruptcy and divorce can be a complicated and emotional process. It’s not easy for anyone. Unfortunately, on top of the emotional considerations of ending a marriage, and the financial factors of dividing assets, at times a divorce can also land one or both spouses in the position of needing to file for bankruptcy.
In addition to having significant impacts on the outcome of a divorce, adding bankruptcy in Michigan on top of divorce adds complications and stress. Look for help where you can, and be sure to choose a lawyer with a solid understanding of both aspects of your case.
Different proceedings, different courts…what is the best way to handle your bankruptcy and divorce?
While divorce proceedings in Michigan are handled in the state court system, bankruptcy is always filed in the Federal United States Bankruptcy Court. Two different courts in two different systems. Two different systems that don’t always communicate easily with each other.
A key part of your lawyer’s work will be to ensure the right documents are filed in the right courts at the right time. And while that may seem simple, there are many factors to consider.
Timing of your bankruptcy and divorce is one important factor. Do you file before, during or after your divorce?
In short, it depends on your situation, and your lawyer can be a valuable resource to help you decide what is best for you.
When is the best time to file for bankruptcy when divorcing?
Filing for bankruptcy before your divorce can make the divorce proceedings go smoother. If it’s beneficial to both spouses, you can file for a joint bankruptcy and share the associated fees and costs to save yourselves time and money. There are also exemptions that you can use to your advantage when you file jointly.
Filing for bankruptcy during your divorce proceedings can complicate your divorce. Why? Because a filing in a federal court takes priority over a divorce in the state courts. As a result, filing for bankruptcy during a divorce triggers an “automatic stay” (or halt) to the divorce proceedings until the bankruptcy is settled. Your assets will be tied up as property can’t be transferred until the bankruptcy is settled.
Filing after a divorce can also have advantages as long as your Judgment of Divorce contains language that contemplates the filing of a bankruptcy.
What about Alimony, Support Payments and Debts?
Despite the difficulty of handling both legal issues at one time, life goes on. The court system has made allowances for some important aspects of divorce during process.
- Alimony & Support Payments – child support and alimony payments are considered priority debts, and cannot be discharged during a Chapter 7 bankruptcy. While some may want to use that to avoid these payments, a qualified Michigan family law attorney who also specializes in bankruptcy law will be aware of the rules, and take steps to stop these types of motions in their tracks.
- Joint Debt – a key part of a divorce is to divide assets…and debt. This means the type and amount of debt that is discharged through your bankruptcy proceedings will depend on the state of your divorce proceedings and the type of bankruptcy you choose.
- Assets and Property – the automatic stay when you file for bankruptcy freezes your assets and property. This means you won’t be able to touch your assets until your process is complete. For this reason, many choose a Chapter 7 (if eligible) so they can pay off debts and complete their divorce more quickly.
Sounds a little confusing? It can be. That’s why a qualified attorney familiar with both bankruptcy and divorce proceedings can be a huge support as you navigate the many decisions to be made when you are facing both bankruptcy and divorce.
Need some help? Contact the Law Office of Stephanie Krane-Boehmer for your separation, bankruptcy and divorce matters. We are located in Rochester Hills, and serve Oakland, Macomb, Genesee, Lapeer Livingston, and Wayne Counties. We are here to support you through all aspects of your filings, mediation, litigation, parenting arrangements and division of property.
Although dealing with legal matters can be intimidating, we will put you at ease with our experience, expertise and down-to-earth approach. Our mission is to achieve the best results for you as you work through the many challenges of bankruptcy and divorce.
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