You may be feeling overwhelmed with debt and considering bankruptcy as a way to get relief. But what if you’re also in the process of getting divorced in California? Can you file for bankruptcy and still protect your assets? Let’s explore your options when filing for bankruptcy and also divorcing.
Filing for bankruptcy together
California is a community property state. This means that any debts incurred during the marriage are considered joint debts. This also includes any debts acquired by just one spouse but that were used for the benefit of the family. So, if you file for bankruptcy as a couple, all of your qualifying joint debts will be discharged. Additionally, it costs less to file for bankruptcy together because you will share all the costs that it takes to wipe out your debts.
Filing individually
In California, married couples are not obligated to file for bankruptcy together. It might make sense for you to file on your own. For example, if you cannot agree on how to handle your debts, you may want to file for bankruptcy to discharge your portion of the debt. Or, if you have a lot of debt in your name, you can file on your own to protect the credit score of your ex for the purposes of child support and custody arrangements and other issues. Nonetheless, the other spouse will still be liable for your joint debts.
When is the right time to file for bankruptcy?
Filing for bankruptcy before a divorce can be beneficial if you want to take advantage of the fresh start that comes after you separate because you will have all your joint debts dealt with or discharged. Also, it allows you to take advantage of the joint filing process like sharing all the filing fees, reducing time commitment for your debts and may also streamline your divorce process.
On the other hand, filing for bankruptcy after a divorce may be necessary if you want to deal with your share of your debts alone. Moreover, it could be helpful if you don’t want to delay your divorce process by dealing with bankruptcy first.
Divorce coupled with bankruptcy is never easy. However, with the right approach, you can make this process easier for both of you.