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Wife and husband signing divorce documents

Bankruptcy & Divorce: What You Need to Know

Pytte Law July 28, 2022

According to the National Vital Statistics System, in 2020, there were 1.9 divorces per every 1,000 Georgia residents. One of the leading causes of divorce is financial problems, and arguments about money have tested even the strongest marriages. For some couples who are considering divorce, the best solution to their financial struggles is a new start.

Filing for bankruptcy can help you turn a new page in your financial life. However, if you are considering divorce at the same time, it’s important to have answers to important questions like, “Which do I file first?” and “Is it better to file for bankruptcy jointly or separately?”

My firm, Pytte Law, is committed to helping my clients find the best solutions to their financial problems. During a difficult life event such as divorce, it’s important to have a strong advocate on your side to help protect your future. With my 25 years of experience, I am proud to serve clients in Savannah, Georgia, as well as Hinesville, Statesboro, Richmond Hill, Ludowici, and the nearby counties of Chatham, Liberty, Bryan, Effingham, and Long.

Filing for Bankruptcy Jointly

Before you begin the divorce process, you may want to consider filing jointly for bankruptcy. When you and your spouse file for bankruptcy jointly, you reduce the number of issues that have to be decided in divorce court. Therefore, you reduce how much time (and money) you have to spend in divorce court.

For most couples, it costs less to file jointly for bankruptcy. Another key benefit of filing jointly for bankruptcy is that it will discharge all qualifying debts of both spouses.

Filing for Bankruptcy Separately

However, filing jointly for bankruptcy may not be the best option for some couples. Sometimes, one spouse needs financial protection as fast as possible. In this case, he or she might need to file separately for bankruptcy as quickly as they can.

In other situations, spouses might not qualify for bankruptcy when their joint income is too high. However, when they file separately, their income drops and they can qualify for bankruptcy. This may depend on Georgia law.

Typically, it is simpler to file for bankruptcy jointly. An experienced bankruptcy attorney can answer your questions about whether it will be better to file for bankruptcy jointly or separately in your specific situation.

Which to File First

If you are considering filing for both divorce and bankruptcy, it’s important to know which you should file for first. For most couples, filing for bankruptcy first will help speed up the divorce process.

However, couples may not always qualify for bankruptcy or for the chapter of bankruptcy that would be best in their situation while they are still married. Usually, this is the case when one spouse earns most of the household income.

 Chapter 7 bankruptcy discharges all qualifying debts – but your income must be below the median income in the state to qualify for it. Filing for divorce first can allow spouses who earn the majority of the household income to qualify for Chapter 7 bankruptcy.

Asset Division

Asset division during bankruptcy and divorce can be a complicated issue. Filing for bankruptcy may delay the distribution of assets after a divorce, especially under a Chapter 7 bankruptcy.

It’s helpful to know that if you file for divorce first, and then file for bankruptcy, the property division process will not be completed until the bankruptcy process is finalized. Speak with an experienced bankruptcy attorney to learn more about how asset division works when you file for bankruptcy.

Discharge of Debt

Discharge of debt is the key benefit of filing for bankruptcy. Once you file for bankruptcy and your debts are discharged, creditor harassment should automatically stop (and there can be legal consequences if it doesn’t).

Discharge of debt works differently under the two types of bankruptcy. Chapter 7 completely discharges all qualifying debts; however, the impact on your credit is long-lasting. Chapter 13 allows you to restructure your debt and has less of an impact on your credit. Discharge of debt helps you begin a new chapter in your financial life.

How Pytte Law Can Help

Filing for both divorce and bankruptcy can be extremely stressful. An experienced bankruptcy attorney can help you make the best decisions for your future. At my firm, Pytte Law, I put my 25 years of experience to use in helping my clients choose the best path forward. I proudly represent clients in Savannah, Georgia, as well as Hinesville, Statesboro, Richmond Hill, and Ludowici. Contact my firm today to schedule a free consultation.