Whether to file for bankruptcy before your divorce proceedings depends on a range of factors, including where you live, your shared and individual debts and assets, and the type of bankruptcy you intend to file. The best course for you depends on your personal circumstances, so it's important to seek legal advice from a bankruptcy lawyer before proceeding. Below are four specific factors you should consider when filing for bankruptcy before a divorce.

Factor 1: Chapter 7 versus Chapter 13

If filing bankruptcy before a divorce, Chapter 7 bankruptcy may be possibly be your best bet.

Filing for bankruptcy before a divorce is better suited to Chapter 7 bankruptcies, especially if the divorce is amicable. Chapter 7 bankruptcies liquidate a debtor's assets and eliminate eligible unsecured debts, like credit card debt, personal loans, and overdue medical and utility bills. Also, Chapter 7 bankruptcies can be finalized quickly, taking three to six months. 

Keep in mind, however, that eligibility for Chapter 7 bankruptcy is ‘means tested'–your combined income must be under the threshold amount. If the combined income of your marriage exceeds the threshold, then Chapter 13 may be your only option if you are determined to file for bankruptcy before your divorce.

Chapter 13 bankruptcies allow individuals to enter into a repayment plan with creditors. As such, it is not a good idea to file for Chapter 13 bankruptcy before divorce. Repayment plans last between three to five years, which can significantly delay your divorce proceedings.

Factor 2: Fees and Other Costs

Money matters, and this is often reflected in the reason why some couples may want to file for bankruptcy before divorce: to reduce the costs of bankruptcy.

Filing a joint bankruptcy petition before a divorce reduces the costs associated with bankruptcy proceedings. You and your spouse pay one filing fee and can share a bankruptcy attorney. The combined fees and costs of Chapter 7 bankruptcy can be between $1,000 to $2,500. For Chapter 13 bankruptcy, the combined fees and costs are significantly more and can meet or exceed $5,000. 

In the scheme of things, you will want to evaluate how much the savings matter compared to the other factors involved in filing for bankruptcy before a divorce.

Factor 3: Assets

In a divorce, your assets are divided, which can be a long, bitter process unless you have already had the matter simplified through bankruptcy.

Filing a Chapter 7 bankruptcy petition may simplify any subsequent divorce proceedings. Bankruptcy wipes out your unsecured debts. Because you no longer have this debt, it is one less task to consider when dividing property. When divorcing, part of the asset division property is determining debt and who owes or will pay that debt.

However, if you want to file for Chapter 13 bankruptcy, it could complicate matters. Chapter 13 is often used for people who want to save their homes or vehicles from foreclosure or repossession. You won't know until the completion of the bankruptcy, which is between three to five years, if those assets will remain yours or not. 

Among other reasons, if filing for bankruptcy before divorce, Chapter 7 bankruptcy could benefit you in terms of asset division while Chapter 13 may not.

Factor 4: Creditors

As a married couple, creditors can often sue both spouses for debt accrued during the marriage and, depending on what happens in divorce court, that can remain true after a divorce. 

A divorce court judge can order that both spouses are responsible for any given debt they have accrued during their marriage. Maybe there is a credit card in one spouse's name only, but the other spouse benefited from the charges on that credit card. The judge can hold both parties responsible for paying off that debt. That means, if one spouse fails to pay and the creditor files a lawsuit, you can be sued for the debt, just like your spouse.

Filing for Chapter 7 bankruptcy before a divorce can result in the discharge of joint debts. Creditors will no longer be able to harass you for payment, meaning they can't sue you, garnish your wages, or freeze your bank account. Of course, bankruptcy before a divorce will only work if both spouses cooperate.

Bankruptcy During a Divorce in Georgia

As a general rule, it's best to keep divorce and bankruptcy proceedings separate, rather than filing for them at the same time. The crossover of assets between the two cases can drag out both proceedings, costing you more time, money, and stress. 

A pending Chapter 7 or 13 bankruptcy can restrict a divorce court's ability to divide your marital assets. Issues that typically arise during divorce proceedings, such as child support or alimony, may delay the finalization of a bankruptcy case. 

There is also this, the two proceedings, even if filed at the same time, will likely not proceed along the same timeline. In the unlikely event the cases are pending simultaneously, your bankruptcy case will be suspended until the divorce court apportions debt and assets to each party. 

So, trying to do both at the same time will not work and does not provide any benefits that could outweigh the many disadvantages.

Remember to contact a local bankruptcy attorney to assist you in filing for bankruptcy and to advise you on the pros and cons of filing a bankruptcy before, during or after marriage.