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When to File Chapter 7 Bankruptcy Before Divorce is Final

As in many things in life, timing can be everything. However, when it comes to bankruptcy and divorce, I recommend filing before the divorce is final in most cases. Here are the four top reasons:

You Are More Likely to Save the Marital Home

The marital home is often the biggest asset at issue in a divorce outside a pension. Fortunately, it is also is most often not at risk of sale in a chapter 7 bankruptcy because there is little or no equity.

However, if there is some equity, protecting it can sometimes come down to exemptions. That particular exemption is only available if the house is your residence at the time of filing. If you both still live there, you can bring more protection to bear.

Filing Bankruptcy is Cheaper and Simpler

Married couples get a “two ‘fer” when it comes to filing bankruptcy. It is the only situation in which a joint petition can be filed. If you waited until after the divorce, each of you would have to file separately with separate attorney's fees.

The Divorce Itself is Not Unduly Delayed

As a practical matter the equitable distribution of marital assets is the only issue in a divorce that is subject to the automatic stay in bankruptcy. As a chapter 7 bankruptcy usually takes about four (4) months to administer, the delay is not that great, and in the meantime, issues like custody, visitation, alimony and child support can still be resolved.

It Is More Likely That A Single Filer Spouse Will Get a Fresh Start

Many divorces come about because, or at least involve, a significant amount of marital debt. Getting rid of that debt through bankruptcy can be a smart part of your divorce strategy, and make your divorce simpler. Naturally, this can only happen if the bankruptcy is filed before your divorce case is over.

So What Do I Do?

If you live here in southern New Jersey, are getting divorced, and are considering bankruptcy, please give my office a call at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your options. Each case is different, and you want to be sure that you get the fresh start you need.

Just looking for more information on how bankruptcy may be able to help with your divorce? Then download my free book, Top Questions Divorcing Couples Ask About NJ Bankruptcy. You should also check out my podcast, Bankruptcy Strategies in Divorce, with episodes every month!

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Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.