BANKRUPTCY PRIOR TO DIVORCE: WHY A MARRIED COUPLE MIGHT FILE BANKRUPTCY BEFORE DIVORCE.
If you can avoid bankruptcy then you should. However if you need to it may be better to file bankruptcy before the divorce for the following reasons:
- Washington State and Federal law allow a married couple to file jointly, eliminating the need to file and pay for two separate bankruptcy cases.
- Exemptions double if you file jointly allowing you to protect more property.
- Washington state is a community property state, meaning all debt incurred while married is both the couples debt. Even though divorce court can divide the debt, it does not alter the contract with the creditor. The creditor can come after whoever's name is on the contract regardless of the debt division during divorce. If a creditor does come after you for your spouse's division of the debt the only remedy is a contempt of court remedy which is timely and costly. Joint bankruptcy can eliminate the debt and both spouses legal obligation, avoiding the problem of who is responsible for which debt.
- Joint filing before divorce will allow for a higher income threshold in Chapter 7 bankruptcy for means test qualifications.
- Joint bankruptcy filing before the divorce can also save time and money during the divorce because the need to split up most debt is wiped away in the Bankruptcy.
- Joint filers can utilize the Federal wild card exemption.
- You and your spouse can really get a "fresh start" after the divorce because the debt is eliminated faster than it would have been if you tried paying it off.
Remember bankruptcy is not the end of the world. It does effect your credit score, but you will start rebuilding it right away. The majority of couples facing divorce and bankruptcy are scared they will loose everything they own. This is not true. Most people who file for bankruptcy keep everything they own. Our Lynnwood, WA attorneys are experienced in both bankruptcy and divorce. Call Bohan Law, PLLC at 425-582-0167 or send us a secure message.