Bankruptcy

Bankruptcy and Divorce

Divorce can cause financial strain. Filing for bankruptcy can seem tempting,as you try to start over with a clean slate. You or your former spouse may want to refresh your finances, but keep in mind there are different factors to consider before you file. Child support and alimony are not dischargeable in bankruptcy court, no matter what chapter you file under. The state you file in, and the amount of debt you owe, directly correlates with how your bankruptcy will affect your divorce.

There are several different types of bankruptcy, and each one will discharge your debts differently. The two most common one are Chapter 7 and Chapter 13. Chapter 7 is a complete bankruptcy, allowing the debtor a fresh start when the proceedings are finished. The debtor is able to maintain exempt property, as well as certain liens. Child support and alimony are not exempt from Chapter 7, and your bankruptcy will remain on your credit report for ten years. The court will determine if the debtor is indeed able to pay the debt, and just attempting to improve his or her financial position. Chapter 13 lends itself to reestablishing the debtor’s finances. The debtor cannot escape the debt, but essentially pays less of it or is granted more time to pay it off. The debtor must have a stable income, even if it is not earned income. Child support, alimony, and public assistance are considered stable income under a Chapter 13 bankruptcy. Chapter 13 remains on your credit report for seven years.

A little planning ahead and knowledgeable legal representation can save you time and money in the long run. Choosing to file for bankruptcy before or after your divorce is dependent upon where you live, how much property you own, the amount of debt you have, and which type of bankruptcy you plan to file. Bankruptcy fees are the same amount whether you file individually or jointly, so filing jointly before the divorce can save you money in court fees. Additionally, attorney fees will be lower if you file jointly. Filing for bankruptcy before the divorce can prevent battles over property and issues surrounding debt, which will lower your divorce costs. A concern is that bankruptcy may delay your divorce proceedings. Moreover, filing jointly may reveal your combined income is too high to qualify for Chapter 7.

Hiring a family lawyer with experience in divorce cases is crucial for a fair outcome. A family law attorney can prepare a Final Judgement of Dissolution of Marriage, which will determine the assets and financial obligations of each party. In the state of Florida, debtors are not able to use the federal bankruptcy exemptions; residents are required to use only the Florida exemptions. According to the Florida Homestead Exemption, residents may exempt an unlimited amount of value in their home or property. Residents can exempt personal property of up to $1,000, in addition to motorvehicle annuity of up to $1,000. Florida exemptions also include wages, pensions, retirement funds, public benefits, and insurance policies.

Bankruptcy and divorce can get complicated, and not all lawyers can assist you. In the state of Florida, divorce is regulated by family law. An experienced Orlando family lawyer, skilled in the area of divorce, can help you navigate around the complexities of divorce and bankruptcy.