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Bankruptcy or divorce: which should you file for first?

Both bankruptcy and a Virginia divorce are emotionally trying legal processes. If both are on your horizon, you may try to kill two birds with one stone and file for both at the same time. Divorce Magazine recommends against doing this. However, if you know both are inevitable, how do you decide which to file for first?

Though you may assume it would be easiest to get both legal processes over with as soon as possible, for the sake of simplicity, you should not allow the two legal matters to overlap with one another. Typically, divorcing couples choose to file for bankruptcy before going through with a divorce. They do this for several reasons. The first and most relevant reason is the automatic stay.

Once you and your spouse file for bankruptcy, the bankruptcy courts will put freezes on your assets and property. This freeze prevents creditors from contacting you or pursuing repayment as the courts sort out what debts you owe and what assets you have that can help you repay some of them. Though the automatic stay is helpful in preventing collection efforts, it can complicate the property division proceedings, if not halt them entirely. This may mean the family courts cannot finalize your divorce until after your bankruptcy is complete, which means prolonged stress for you and your loved ones.

Another reason many couples choose to file for bankruptcy before filing for divorce is the cost savings. If you and your spouse decide to file for bankruptcy together, you can split the attorney and filing fees. Additionally, finalizing bankruptcy before filing for divorce may protect you from having to pay joint debt, which could be significant. Also, because your bankruptcy trustee will divide your assets during the bankruptcy process, property division may go much smoother, which could save you on court and divorce attorney costs. 

The only two instances in which it would make sense to file for divorce before bankruptcy is if you and your spouse are on hostile terms or if you and your spouse make too much to qualify for chapter 7 bankruptcy. If your individual incomes fall below the chapter 7 threshold, it might make more sense to file for divorce before bankruptcy.

The content in this article is for educational purposes only. It should not be construed as legal advice. 

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