They say bad things tend to come in bunches. Sometimes, the deterioration of a marriage is accompanied by a deterioration of a couple’s finances, whether or not one of those problems caused the other. When that happens, and decisions need to be made about ending the marriage and seeking protection from creditors and debt collectors, timing can be everything. If both divorce and bankruptcy are looming on the horizon for couples in Alpharetta or elsewhere throughout the state of Georgia, which should come first?
Divorce proceedings and bankruptcy proceedings both cover a lot of the same ground insofar as they both address what happens to a couple’s assets and debts. Given that overlap, and given that different courts are involved, it can be hard to resolve these complicated financial issues in two venues at the same time. So, a choice needs to be made as to which court should have first crack at these issues.
The circumstances of your particular marital and financial situation will drive the decision as to how to proceed, including whether to file a Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 or Chapter 13
If you are considering a Chapter 7 bankruptcy proceeding, it may make more sense to proceed with the bankruptcy before filing for divorce as such bankruptcy cases can often be resolved in a matter of months. You and your spouse can file jointly, resolve and discharge your debts, and move forward with your divorce with a clear picture of your remaining assets and obligations.
Of course, a Chapter 7 bankruptcy prior to divorce may not be an option for couples in Alpharetta whose combined income level exceeds the “means test” for qualifying for a Chapter 7 proceeding. However, individually filed, separate Chapter 7 bankruptcies may be an option after the divorce when each spouse’s income is considered on its own.
Chapter 13 bankruptcies take a significantly longer time to resolve, since debts need to be paid off over the course of a three to five-year repayment plan. This makes Chapter 13 a less attractive option in the abstract for couples who want to resolve their marital status sooner rather than later.
One compelling reason some Georgia couples decide to file a joint bankruptcy prior to initiating divorce proceedings is that in increases the amount of assets which can fall outside of the bankruptcy proceeding and therefore cannot be used to satisfy outstanding debts.
In bankruptcy proceedings, the filer is entitled to certain “exemptions” that are provided under state law. Exemptions protect the value of certain assets, such as your home, car, or retirement accounts from the reach of creditors or the control of the bankruptcy trustee. The larger the exemption, the more property you can keep in a Chapter 7 and the lower the amount you may need to repay creditors in a Chapter 13.
In Georgia, couples who file for bankruptcy jointly can double the amount of exemptions, providing greater protection for the couple’s property, something that is usually in both spouse’s interests.
One thing that is true for all couples facing the prospect of both divorce and bankruptcy: no decisions should be made as to how to proceed on either front without first consulting with an attorney experienced in the nuances of divorce law and bankruptcy law. Neither can be looked at in isolation, and the choices you make now will have a long-lasting impact on your financial future.
Call the Alpharetta Divorce Lawyers at North Metro Litigators Today
The Alpharetta divorce lawyers and bankruptcy lawyers at North Metro Litigators provide trusted and strategic counsel to individuals facing difficult personal and financial challenges and do so at a reasonable cost. Call us today at (678) 944-0000 or contact us to arrange for your free initial consultation.