Filing for bankruptcy might be the last thing you consider when going through a divorce. However, if you and your spouse have accrued significant debt during marriage, it would be wise to consider bankruptcy to ensure your financial future after divorce.

The timing of your bankruptcy depends on various factors, but knowing the benefits of filing before and after divorce could help you make your final decision.

What to Consider When Deciding to File Before or After Divorce

Everyone’s situation is different, and you must consider the following when deciding to file for bankruptcy before or after your divorce:

The Type of Bankruptcy

The type of bankruptcy you’re considering heavily influences your decision to file before or after. The most common types of bankruptcy are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy allows you to remove your debt by liquidating your assets.

Minnesota has extremely lenient exemption laws so that married couples may keep most of their assets. Chapter 7 bankruptcies are fast, allowing you to complete the process in three to four months. For this reason, you should file a Chapter 7 bankruptcy before your divorce is final.

However, if you don’t qualify for Chapter 7 or would like to pay your debt through a repayment plan, you may consider filing for Chapter 13 bankruptcy, a much longer process. Chapter 13 bankruptcies can last anywhere from 3-5 years to complete. Given the time and expense required to file for Chapter 13 bankruptcy, you may choose to do so after your divorce.

Joint or Individual Debt

Although Minnesota courts divide assets and debts equitably between both parties, they will only divide marital property — assets and debts acquired during marriage. Any debt accrued before marriage is considered separate property and therefore not subject to Minnesota’s equitable distribution laws.

Your spouse will only be responsible for the portion of debt you gained during marriage. Knowing this, you might wait until after the divorce to file for bankruptcy to better gauge your debt amount.

Cooperation Between Spouses

Cooperation is fundamental for any divorce, especially one involving a bankruptcy. The more you cooperate with your spouse, the smoother the divorce and bankruptcy process. Cooperative spouses may jointly file for Chapter 7 bankruptcy before their divorce is final. Although this is the ideal scenario, it’s not always an option.

After all, you likely are divorcing your spouse because you cannot cooperate with one another. If you’re going through a nasty divorce and feel that bankruptcy will further complicate the process, you might consider filing individually after your divorce.

The Cost of Divorce

Divorce is one of the leading causes of bankruptcy in the United States. With the average divorce in the U.S. costing $15,000-$20,000, you’re likely anticipating an expensive, contentious divorce. You might not know how the divorce will impact you financially after it’s over. You might consider filing for bankruptcy after your divorce is final to avoid falling back into the same rut again.

However, there are situations where filing for bankruptcy before your divorce is over may be a good idea. If you and your spouse are on good terms, filing for bankruptcy jointly could save you money on attorney fees and help you keep valuable assets.

Financial Future

You and your spouse should both consider financial goals for life after your divorce. While your credit could take a slight hit after filing, bankruptcy could help you finally start building your wealth again.

Even though you and your spouse may not be on the best terms, you must look at the bigger picture and weigh the pros and cons of filing before or after your divorce. You may strongly consider filing a joint Chapter 7 bankruptcy to save the most time and money.

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