Financial troubles and marital issues often occur in tandem, making many New York residents wonder if it’s better to file divorce or bankruptcy first. If it looks like both are on the horizon, you can take steps that help you complete each process as smoothly as possible. Although you can file for both simultaneously, the court typically suspends bankruptcy proceedings until there is an agreed-upon divorce settlement.
According to Experian, the benefits of filing bankruptcy before divorce include the possibility of discharging a significant amount of marital debt. However, not all debt is dischargeable, such as fines owed to government agencies, court penalties or fines and student loans.
When you pass the means test required for Chapter 7, you could have the bankruptcy proceedings behind you in six months or less. This is unlike Chapter 13, which requires a payment plan of up to five years. Since Chapter 7 pays creditors from liquidated non-exempt assets, the divorce proceedings that follow may take less time than if you filed for divorce first.
If you file for bankruptcy during or after divorce proceedings, the same attorney cannot represent you both. It creates a conflict of interest, as two clients are legal opponents in a different legal issue. When one of you must find separate legal representation, it slows the process. Not only do you need to retain another lawyer, but also bring them up to speed on the proceedings so far. If Chapter 7 is something both you and your soon-to-be-ex expect, you could save filing and attorney’s fees by doing it jointly.
Chapter 7 bankruptcy and divorce are both chances for a fresh start. Understanding how both legal processes work can help you determine which should come first.