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At the Bankruptcy Center of Illinois, our DuPage County attorneys represent clients seeking practical solutions to their debt. Married couples in need of assistance with divorce and bankruptcy receive honest, straightforward legal assistance. Some marriages dissolve due to financial issues, and other couples reach the point where they accrue more debt than they can manage. If you are a divorcing couple considering filing for bankruptcy, we are here to explain your options in a clear manner, with the ultimate goal of protecting your interests. All clients receive a commitment to their needs from our team of experienced DuPage County attorneys.
Filing for bankruptcy before or after a divorce is an important decision. Factors such as where you reside, the type of debt, and amount of property are essential to determining whether to file for bankruptcy or divorce first. When an individual, married couple, or a business files for bankruptcy, the case begins. Married couples that file together submit a “joint petition” that includes the financial information for both spouses.
Couples undergoing a divorce may find it more efficient to file for bankruptcy together. By filing a joint petition, the bankruptcy court will discharge the debt of both spouses. This may lead to fewer issues that need to be decided in divorce court. It is also less costly to file bankruptcy together. The fees involved in filing for joint and individual bankruptcy are equivalent. By filing a joint bankruptcy with your spouse before getting divorced, you can share these costs.
It is not required that married people file together. Individual filings may be preferred when one spouse needs bankruptcy protection immediately. In some circumstances a spouse may wait to file for bankruptcy until the divorce is final. If they have a reduction in income, it may be easier to pass the means test and to file for bankruptcy under Chapter 7. Filing individually for bankruptcy creates an automatic stay against creditors. Once a bankruptcy estate is established, it is outside the jurisdiction or control of the divorce court.
Illinois provides for married couples to receive a double exemption for certain assets. These can include houses, personal property, and pensions. For a homestead exemption, both spouses must have ownership interest in the property. If a couple files for bankruptcy before the divorce, they may be able to keep most of their marital assets.
Dividing debts in a divorce does not affect each person’s liability to creditors. Creditors can try to collect debts from spouses not awarded the debt, if the other spouse does not pay. It is possible to seek reimbursement from an ex-spouse for payments made on a debt awarded to them.
A couple that qualifies for Chapter 7 bankruptcy may choose to file for bankruptcy before divorce. Chapter 7 is a liquidation bankruptcy that typically discharges debt after a few months. This means that unsecured debts such as medical bills and credit card debt is dismissed. Often, Chapter 7 bankruptcy can be completed quickly, before a divorce. In comparison, filing for Chapter 13 bankruptcy can take years, and it may be preferable for couples to divorce before undergoing this process.
Chapter 13 bankruptcy usually requires three to five years to complete. Essentially, Chapter 13 is a debt consolidation and includes a plan to repay debts. There may be complications for couples that seek to divorce during the time period of repayment. Dividing payments under a repayment plan can prove complex if you are getting a divorce. Some couples may consider converting Chapter 13 bankruptcy to Chapter 7.
The emotional stress of undergoing bankruptcy and divorce can be overwhelming. Representation by compassionate legal counsel can make the process easier. At the Bankruptcy Center of Illinois, we maintain in-depth knowledge of issues central to bankruptcy and divorce. Our experienced bankruptcy attorneys offer a free consultation. Contact our office by phone at (773)993-0024 or online. We proudly assist people living in DuPage County as well as areas of Cook County and other localities.