Last time we covered bankruptcy before the divorce. This article will focus on filing that Chapter 7 or Chapter 13 Bankruptcy after the divorce.
Advantages to filing after the divorce:
Advantages:
- Two sets of exemptions. These means each individual can protect over 31,000 of cars/assets or $75,000 of home equity.
- Get the divorce over and done with sooner.
- May be able to qualify for a Chapter 7 as separate family when would be forced into a Chapter 13 when married.
- May need to wait anyway to establish California residency for exemption purposes. You have to live in the state for 2 years to use California exemptions. If you just moved here, do the divorce first as it may be better to wait anyway.
- No spousal waiver needed. This means less contact with the louse of a spouse.
Disadvantages:
- Two sets of bankruptcy costs. While only a potential of $1500 to $2000, it is something to consider.
- Trustee may invalidate the divorce agreement if unequal. AKA Fraudulent Conveyance. Trustee can look back for 4 years, so your recent divorce will definitely be looked at. You cannot hide assets, even by giving them to your ex-spouse, even for peace of mind. To avoid fraudulent conveyances, it has to be for value, and love, or the lack of it, is not value.
- Have to wait longer to re-establish your credit. This may mean putting off buying a house for another 6 months while waiting for the divorce and bankruptcy to finish. Divorce is not a good thing, but bankruptcy is far more of a factor on large purchases and your credit. Time is a good thing to improve your credit score, and the longer you delay the bankruptcy, the longer until that bk comes off your credit report or causes less damage to your credit report.
