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When filing for divorce, consider a bankruptcy filing too

What if you and your spouse are in financial turmoil before you start to hit a rough patch in your relationship? What would be the best course of action for you and your spouse?

Well, it all depends on your situation. This is a question that does not have a right or wrong answer. Every couple will have intracacies in their personal lives that make it difficult to give a blanket answer. However, in some cases, filing for bankruptcy before the divorce can be very beneficial for the splitting couple.

Divorce and bankruptcy have a complicated relationship in their own right. Going through a divorce may cause one of the spouses to suffer great financial hardship, causing a bankruptcy. On the other end of the spectrum, if you go through some tough financial times, the stress of the situation can cause marital hardship, resulting in a divorce.

For those who do decide to file for bankruptcy before a divorce, there can be significant benefits. For example, some of your extensive debts may be discharged through the bankruptcy process, sparing you some of the financial stress of the divorce. At the same time, if you and your spouse agree to go through the bankruptcy together, both of your debts could be reduced or discharged.

Remember that debt is an asset in divorce, which means that it can be divvied up in the divorce. You could end up paying for your spouse's car loan (or vice versa), so it could really help to get things sorted out before hand.

Source: Lansing State Journal, "Divorce, bankruptcy sometimes go hand-in-hand," Gene Turnwald, Sept. 27, 2013

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