Bankruptcy Or Divorce: Which Should You File For First?


It is no secret that one of the most common causes of divorce is financial difficulties. In fact, according to a recent poll of divorced couples, 21 percent of divorces were the result of money problems. That rate increases to nearly 25 percent for younger couples between the ages of 25 and 44 and remains constant for couples up to 64 years of age. Bearing those stats in mind, it only makes sense that many clients turn to us wondering whether they should file for bankruptcy or divorce first. Some wonder if it would be best to file for both at the same time, rationalizing that they could “kill two birds with one stone.” As with anything as personal as bankruptcy or divorce, the answer is, it depends.

It is Almost Always Best to File for Bankruptcy First

According to the American Bar Association, it is almost always in a couple’s best interests to file for bankruptcy before filing for divorce. For starters, couples who file jointly can save substantial money in doing so. Filing one bankruptcy is costly and time consuming—filing two means double the cost and double the time, two resources those considering bankruptcy generally do not have. When a couple files together, they can file one petition instead of two and pay just one court fee.

Filing for bankruptcy before filing for divorce can also simplify the asset and debt division processes. When a person or couple files for bankruptcy, the bankruptcy courts will discharge all dischargeable debts, categorize and appraise assets, and liquidate most of those assets to repay creditors. When all is said and done, the couple will have little to no debt to divvy up, which means the issue of debt does not have to be addressed at all in the divorce. Because most major assets will have been liquidated, the couple will not have much property to fight over. Both lack of debt and minimal property means the divorce will be less time consuming and therefore, less costly, a fact that means both parties will be in a much better position to rebuild financially once they go their separate ways.

Finally, when a couple does decide to file bankruptcy together, they get double the exemptions. For instance, instead of being able to exempt just $1,000 of personal property, a couple could exempt up to $2,000. If the couple chooses not to use Florida’s homestead exemption (which is one of the most generous in the nation, allowing homeowners to exempt up to 100 percent of their property), they can claim up to $8,000 in personal property (which is double the $4,000 per debtor). Many divorcing couples may prefer to go this route as chances are they were going to get rid of the family home regardless.

They only potential pitfall of filing for bankruptcy before divorce is that, together, two wage earners may be unable to qualify for Chapter 7. However, if the parties waited until after they divorced to file, one or both could qualify for Chapter 7.

When You May Want to File for Divorce First

The ABA does provide some examples for when it would be best to file for divorce first. For instance, if, as mentioned above, the spouses earned too much together to qualify for Chapter 7, they may wish to wait until after their divorce to file for bankruptcy. Additionally, if one spouse needs financial support post-divorce and the only way to get it is via a court order, it may be best to postpone bankruptcy until after the separation is finalized. If one spouse needs a custody order in place immediately, our lawyers also suggest filing for divorce as soon as possible.

Most Attorneys Recommend Simultaneous Filing

It is almost never a good idea to file for divorce and bankruptcy at the same time. Doing so would cause unwarranted headache for both parties and make both the bankruptcy and divorce processes unnecessarily complex. However, there may be one or two instances in which simultaneous filing is unavoidable. For instance, maybe one parent needs a custody order in place immediately as the other is failing to pay child support. However, the other spouse is facing wage garnishment, a bank levy, or foreclosure due to dire financial circumstances. In this instance, a couple and/or individuals would have no choice but to file for bankruptcy and divorce at the same time.

Consult With a Lawyer Before You Make Any Decisions

The decisions to divorce and file bankruptcy are never easy decisions to make. If both divorce and bankruptcy are inevitabilities for you, consult with a knowledgeable lawyer before you take any decisive action. Contact the Boca Raton divorce attorneys at the Law Offices of David L. Hirshberg, P.A., today.

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