Bankruptcy and Divorce: Which Should I File First?

There are three major issues when it comes to divorce. Only one is affected by filing for bankruptcy.

1)  The Division of Property

The automatic stay in bankruptcy is put in place as soon as you file. It protects you from actions by creditors. When you file for bankruptcy, the automatic stay will stop the division of property. Therefore, if you file for bankruptcy after you file for divorce, but before the divorce court divides your property, that process is frozen until the divorce proceedings are over.


2) Child Custody

The automatic stay will not affect the determination of child custody. Thus it will not be delayed by filing bankruptcy.

3)      Spousal Support/ Child Support

Issues of support will not be delayed by filing for bankruptcy.

Property Division and Bankruptcy

Part of the division of property in a divorce involves debt, and debt is at the core of every bankruptcy. Filing for bankruptcy can often eliminate any debts that would otherwise be a problematic issue when filing for divorce. This is especially true if both parties to the divorce are cooperating, and can therefore file for bankruptcy together as well.

Since bankruptcy can eliminate debt division issues, it is sometimes a good choice to file for bankruptcy before filing for divorce, or at least before property is divided during a divorce, even though it technically freezes the division of property.

When Only One Spouse Files Bankruptcy

The combination of bankruptcy and divorce is more problematic if only one spouse is filing for bankruptcy. When this occurs, it is better to file for bankruptcy before debts are divided by the bankruptcy court, otherwise, the bankruptcy’s ability to wipe out debt may be limited.

If your bankruptcy is not filed until after debts are divided, the non-filing spouse can still try to collect on debts from the other spouse through the divorce, even though the debt will technically be eliminated by the bankruptcy that is filed afterward.

Both bankruptcy law and family law are complicated, and require years for an attorney to master. There are some cases where it actually makes sense to wait to file for bankruptcy until after your divorce is final. If you are considering divorce and bankruptcy, you should contact experienced attorneys in both fields. Let them help you determine when it makes sense to file for each.