It is a well known fact that many marriages fail due to financial difficulties. We’ve all heard the tragic stories about a spouse who has a spending problem and spends the couple’s entire savings. A spouse has a gambling habit, and the couple’s retirement assets have been squandered. One spouse’s reputation and, in a short time, a successful career are ruined. Alternatively, if one spouse is unemployed, the other grows angry and resentful of their spouse’s lack of income.

Have you ever had a financial crisis that caused your marriage to fall apart? If that’s the case, you may be considering bankruptcy but aren’t sure whether to file before or after the divorce. “Does the timing make a difference?” you might be wondering. You could be thinking right now that you’d rather talk to a divorce lawyer first. After all, you and your spouse dispute about money all the time, and you’re tempted to walk out the door or have your partner pack their belongings.

We’ll tell you straight out: filing for divorce first will not automatically lessen the financial strain. In many circumstances, if a couple files for divorce before filing for bankruptcy, they and their children will be worse off. It is often more cost effective for the couple to file for bankruptcy first. Here are some compelling reasons why filing for bankruptcy before filing for divorce may be a better option for you.

1. Look out for your spouse filing individually. Only one spouse may apply for bankruptcy before, during, or after a divorce. If your spouse files for bankruptcy before or during the divorce, and you choose not to file jointly because you are terrified of the bankruptcy stigma, guess what? You’ll most likely be responsible for the entire combined debt.

Why? Because your spouse cannot be made to pay any joint debts through the property settlement if they file bankruptcy to eliminate their liability on any joint and other dischargeable debts. In the end, you’re responsible for the entirety of the combined debt.

2. It costs less to file jointly. It is less expensive for a married couple to file bankruptcy together than it is to file bankruptcy separately. This means you only have to pay one filing cost, one set of court documents, and usually just one attorney charge. In other words, filing jointly can save you half the money. Many bankruptcy lawyers charge the same cost for a joint case as they do for an individual case; however, some charge more if there is additional work required. You can compare attorney fees and choose a lawyer that resonates with you because most bankruptcy lawyers give free case evaluations.

3. Filing for bankruptcy means discharging joint debts. Let’s say you declare bankruptcy under Chapter 7. All qualified joint debts, such as credit card debt, personal loans, medical expenses, utility bills, and past-due mobile bills, will be discharged in that situation. If you and your spouse have thousands of dollars in joint credit card debt, this might relieve you of a significant financial burden before you file for divorce.

If you file for bankruptcy after your divorce, it may not be beneficial to you. When you have a lot of debt, you’ll almost certainly be obliged to shoulder some of the joint debt you and your spouse accumulated during the marriage. To put it another way, if you agree to pay a joint obligation, you’re committing to cover your spouse’s share of the burden.  You are not releasing your pledge to cover your spouse’s part of the debt if you enter bankruptcy after the divorce and the debt is discharged.

Suppose you and your partner were to agree to pay $10,000 on a shared credit card. In your divorce settlement, you agree to pay off the credit card. It’s crucial to remember that a divorce settlement is nothing more than a mutual agreement between you and your ex-spouse. Your spouse’s obligation to pay on any joint accounts remains unaffected by the settlement. You can “agree” to pay off the $10,000 credit card, but if you don’t, the creditor can pursue your ex, who is still liable.

You agreed to pay off the credit card instead of your spouse as part of the settlement. If you file for bankruptcy after your divorce, you will be relieved of your obligation to pay the credit card bill. You are not, however, relieving your former spouse of his or her obligation to pay the loan. You’ll have to compensate your ex spouse if he or she is obliged to pay the card, or you’ll be required to pay the credit card debt yourself.

If you file bankruptcy before divorcing, however, the debt will be completely erased, and you will not be obliged to pay it as part of the divorce settlement. If you file jointly with your spouse, he or she will be relieved of all qualifying joint debts as well.

4. When couples file jointly, it makes the settlement process easier. When a couple declares bankruptcy before divorcing, the property settlement procedure is simplified because there is less debt to distribute (often significantly less) between the spouses. Not only that, but people don’t have to keep track of joint debts that they and their spouses agree to pay in order to protect their credit. This alone saves a great deal of stress, credit monitoring, and time!

We hope you find this financial advice useful. Contact Spodek Law Group for a free case consultation to learn more about filing for divorce in California.