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Choose the right time for bankruptcy and divorce

Some people believe that going through bankruptcy and divorce at the same time is never a good idea. Others think it could be the perfect time. There is no right answer. Everyone's situation is different.

However, it's normally agreed that bankruptcy and divorce shouldn't happen at the same time. These are two significant legal matters, so going through them at the same time is extremely stressful. Additionally, a bankruptcy or divorce could lead to your assets being held temporarily. Without access to them, you could face significant financial struggles.

In Chapter 7 bankruptcy, for example, an automatic stay is placed. That stops creditors from accessing your property or assets. If you file for divorce at the same time, the divorce court will want you to divide your assets. Since the automatic stay is in place, there is no way to do that. The court would be unable to access and divide your family assets until the automatic stay was lifted.

Choosing bankruptcy or divorce first

Choosing bankruptcy or divorce first is the real challenge. If you divide your assets and debts in divorce first, you might decide that they're manageable in your own situation. If you and your spouse agree that the divorce can wait until bankruptcy resolves your debts, then you should try bankruptcy first.

Usually, people have more exemptions while they're still married. This means that you may wish to stay married during bankruptcy, since you'll have a better chance of saving more of your assets. Then, when you do divorce, you'll have a greater number of assets to divide between each other.

Chapter 7 bankruptcy is possibly a good choice for bankruptcy if you want to divorce quickly. Chapter 7 bankruptcy takes only three to six months, so you'll be able to resolve your debt issues while still being able to divorce in a timely fashion. This is great for people who want to get a divorce within the year but who also have significant problems with debt to deal with.

Keep in mind that not all debts are included in bankruptcy, so you'll have to be cautious about what you believe bankruptcy will do for your situation. Alimony, child support, taxes and student loans are often not able to be discharged, so if those are the majority of your debts, you may find that the bankruptcy doesn't help you much or at all.

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