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Declaring Credit Card Bankruptcy wise before divorce?

I will be filing for divorce in the new year and use to have perfect credit but was late with 1-2 mortgage pmts and 1 car pmt last winter that are both in my name and it tanked my credit. I also have about 45K in credit card debt but never miss a pmt but can't keep up with the crazy monthly pmts. Is it better to file for credit card bankruptsy before a divorce since my credit is now bad anytways so that I can make a fresh start? I have a small child and am worried about getting approvevd for a rental apt or home but my credit is bad now so not sure if it really makes a difference to file for this now or wait? I work F and make a decent salary but the CC debt will keep me from being able to pay a monthly rent or home loan, car pmt, school for my son etc...especially after a divorce.

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Submitted Mon, 12/29/2014 - 21:39

Dear December1973,

Hello again. It is Joshua H. Bearce, associate attorney, at the Law Office of Wyckoff Z. Nissenbaum, a law firm specializing in divorce and domestic relations matters.

The Bankruptcy filing that you would seek in your particular situation would be what is known as a Chapter 7 Bankruptcy. A Chapter 7 Bankruptcy will rid you of your credit card debts and provide you with a fresh start. The answer to your question regarding declaring bankruptcy before divorce depends upon a variety of factors, namely, your filing status, income, and the amount of property you own. Bankruptcy filing fees are the same whether you file on your own or jointly with your spouse. If you can file bankruptcy jointly with your spouse before the divorce, then you will simplify your divorce proceedings relating to property division and the allocation of marital debt, which will lower your divorce costs. Additionally, if you file bankruptcy jointly with your spouse, the amount that is exempt from creditors will be doubled to include your spouse’s creditor exemption amount. In Massachusetts, you have the option of employing the Federal bankruptcy exemptions or the State of Massachusetts’s bankruptcy exemptions depending on your particular needs. This is where your existing property and current income come into play. If you wish to file jointly and your joint income is too high relative to the size of your household, then you will not qualify for Chapter 7 Bankruptcy. In addition, if the value of your joint property exceeds either the Federal or Massachusetts’s exemption amounts, then amount in excess of the exemptions will be sold and the proceeds paid to your creditors.

In your particular situation, it seems unlikely that you will be able to file bankruptcy jointly with your spouse because of his history of adultery and abuse towards yourself and your child. In this case, it may be better to wait until after you divorce your husband. The reason why it may be better is because you likely will have more property than is allowed by the Federal or Massachusetts’s individual bankruptcy exemptions, thereby subjecting a large portion of your property to the claims of your creditors in bankruptcy. Therefore, it may be advantageous for you to wait until a Court has divided your assets and liabilities between yourself and your Husband. This will likely lower your liabilities, thereby subjecting less of your property to the claims of your creditors should you file for bankruptcy individually. It is also important to remember that if you file for bankruptcy during your divorce, the division of your marital property will be suspended until the bankruptcy is completed. Finally, regarding the effect of bankruptcy on your credit, if your credit is already bad, then bankruptcy will probably not make things worse. However, bankruptcy will erase your old debts, thereby likely placing you in a better position to get new credit in the future.

Once again, I hope that my answer sufficiently allayed any questions or concerns you may have had regarding this issue. As always, if you have any additional questions or concerns, please do not hesitate to contact me at josh@somervillelawoffice.com or at (617) 410 – 6467.

Sincerely,

Joshua H. Bearce, Esq.



Submitted Fri, 01/02/2015 - 12:28

It is more advisable for you to file bankruptcy prior to filing for divorce for several reasons. The debt that get discharged in bankruptcy, could only cloud your divorce settlement negotiations. This way you will not be held responsible to pay any debts of the marriage, as you will have discharge your obligation to pay them already in the bankruptcy. Your credit is going to be affected one way or the other, so the sooner you file bankruptcy sooner your debt is discharged and the sooner you can be on your way to repairing your credit and a fresh start. At our law offices we also offer credit repair services, that can get your credit above 700 within as little as two years after a bankruptcy discharged.


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