Some New York residents who are in unhappy marriages in which finances are an issue may want to file for both divorce and for bankruptcy protection. Since these two separate types of cases can have major effects on one another, it is important for people to understand the appropriate filing order and timing to avoid problems.
Several scenarios change the order of filing bankruptcy and divorce petitions. If a person's spouse has significant income and assets, they may want to file their divorce case first. If a joint bankruptcy petition is filed first, the spouse's income will be counted as part of the household income, and it could prevent them from being able to get a Chapter 7 discharge of their debt.
If both spouses have significant debts and wish to file for bankruptcy jointly, they may want to do so before filing for divorce. That will allow them both to benefit from the debt discharge. People should be aware that when they subsequently file for divorce, however, all of the property they own will become a part of their bankruptcy estate until the discharge is final. This would mean that it can not be divided in a divorce proceeding until the discharge has been issued or unless the bankruptcy court otherwise agrees.
People are contemplating a divorce because their marriage is foundering because of overwhelming debt may want to discuss their situation with their family law attorney. The attorney may be able to work with a bankruptcy attorney to determine the best filing order, depending on the person's individual circumstances as well as the circumstances of the client's estranged spouse.