Bankruptcy Attorney in Royal Oak & Wyandotte, Michigan
Bankruptcy and divorce are two terrifying words on their own but become more dreadful when combined and experienced together. The idea alone of undergoing divorce and bankruptcy is one of the most stressful situations anyone would ever face. It’s a nightmare, a situation no one would ever dream of. But if you are trapped in the middle of this circumstance, how are you going to face these tragedies and all their legalities?
To be in the midst of this situation is beyond overwhelming and to say that debt relief and a new beginning await you at the end of the process wouldn’t even probably lessen the ordeal you have to go through. The good news is, you don’t have to face it alone. You can ask for legal assistance from a trusted bankruptcy lawyer in Michigan to guide you.
It will be a bumpy road but we are here to lead you. Give us a call now and let’s walk this path together!
Why do I need a Bankruptcy Attorney in Royal Oak & Wyandotte, Michigan
If you are facing a situation where you have to file for divorce and bankruptcy and your only option is “when” it would be wise to know the pros and cons of each timing.
Every bankruptcy and divorce cases are different. The best timing will be subject to your current circumstances. Consulting a bankruptcy lawyer is the best way to determine what is suitable for your unique case. A credible attorney who has years of experience helping each client make the best decision for their future would be an invaluable resource.
Hammerschmidt Stickradt & Associates in Royal Oak and Wyandotte, Michigan has been instrumental in countless success stories of debt relief and new beginnings after a very complicated and emotionally challenging bankruptcy and divorce process. In this life-changing event you are facing, our lawyers are here to provide you with the most advantageous solution to your specific needs. Call us now and request a free consultation. We can help you lessen your worries!
What to Consider in Divorce and Bankruptcy?
Divorce can be a leading reason for bankruptcy. Bankruptcy can be a leading reason for divorce. And both processes are detrimental to your financial status. Whether you file for bankruptcy first before divorce, or divorce first before bankruptcy, or file them simultaneously, there are a couple of areas you need to evaluate.
- Where you live. Marital debts are treated differently depending on where you live. If you live in a common law property state, all debts incurred by a spouse are considered separate from the other spouse. In a community property state, spouses equally share all assets and debts acquired during their marriage. On the other hand, an equitable distribution state divides properties and debts on a determination of what is fair under each case’s circumstances.
Michigan is an equitable distribution state. It also allows debtors to choose whether they want federal exemption or the Michigan state exemption system to be applied to their case but not both. In addition, Michigan also allows double exemptions for spouses filing together except for homestead exemptions.
- How many assets and properties do you have including debts. Before proceeding with filing for bankruptcy and divorce, you need to make a list of all your assets and properties. You also have to create a list of all your debts and creditors. Both divorce and bankruptcy will need complete and transparent information about your assets and liabilities that will be considered in the property and debt division. You have to clearly identify all individual and shared ownership properties and debts.
- What type of bankruptcy do you wish to file. One of the major considerations to make is to decide whether you will file for Chapter 7 or Chapter 13 bankruptcy. Both have their own set of advantages and disadvantages that must be carefully evaluated.
Divorce and Bankruptcy: Which Should You File First?
In order to properly make a sound evaluation before deciding when’s the best time to file for divorce and bankruptcy, let’s take a look at below areas of consideration.
- Joint or Separate Petition
- Divorce and Bankruptcy Costs
- Chapter 7 vs Chapter 13 Bankruptcy
- Division of Properties
- Marital Debt Discharge
- Qualification for Chapter 7 Bankruptcy (Means Test)
Joint or Separate Petition
Married couples can decide whether they want to file for an individual or joint bankruptcy filing. The option to file for a joint or separate petition can occur before, during, or after divorce. No one is mandated or obligated to file together. But it is considered more beneficial for them to file a joint bankruptcy case.
- Bankruptcy filing together streamlines the divorce and bankruptcy process
- Bankruptcy court may discharge the dischargeable debt of both spouses, reducing the issues to be resolved in family court
- Filing together saves money since it costs less to file a bankruptcy petition together as opposed to separate
- It is more time efficient to process the bankruptcy filing together. Bankruptcy entails a lot of significant paperwork. You need to prepare all financial statements, bank documentation, asset and property titles and etc. It will save a lot of time for both spouses to file jointly.
However, if after legal consultation with your Michigan divorce and bankruptcy attorney it has been determined that filing individually fits your needs better, then you can opt for this. This often happens if one spouse needs the automatic stay or bankruptcy protection immediately. Or if filing separately can help in passing and qualifying for the Chapter 7 means test.
Divorce and Bankruptcy Costs
- Bankruptcy before the divorce. Bankruptcy proceedings can be costly and doing it before a divorce can save both you and your spouse money. Associated costs with filing for bankruptcy include court filing fees, attorney fees, and credit counseling courses. These fees can be shared since you are still married and can file a joint bankruptcy.
- Bankruptcy during a divorce. The costs that are associated with bankruptcy and divorce including the division of marital assets may cause challenges financially, especially in keeping up with the monthly payments of debts not covered by the bankruptcy law and under the Chapter 13 repayment plan. It also means paying separate legal fees to two attorneys which adds to the financial burden.
- Bankruptcy after divorce. Filing for a bankruptcy case separately after divorce means both of you paying more attorney fees, court filing fees, and credit counseling courses.
Division of Properties
- Bankruptcy before the divorce. Division of properties after bankruptcy will only be quick and simple. You will only divide whatever assets and property were left after bankruptcy. Mostly, these properties are the ones determined as exempted by the bankruptcy law.
- Bankruptcy during a divorce. After filing for bankruptcy, all your properties and assets become the property of the bankruptcy estate. The automatic stay protection will also take effect. This will prevent the divorce judge to access and divide your assets since they will be put on hold. Transfer of any property to your spouse, while the case is still pending, is also impossible.
The divorce proceedings will be dragged on longer than necessary. It will not be finalized until the bankruptcy case is concluded because the division of properties can not take place.
- Bankruptcy after divorce. Waiting after the divorce is concluded is advantageous if you plan for Chapter 13 bankruptcy so you can retain more of your assets and properties.
Marital Debt Discharge
- Bankruptcy before the divorce. If you filed for bankruptcy before divorce, there would be no worries about who will be responsible for whichever debts. Since all your dischargeable debts will be erased by the bankruptcy court after the discharge decision, neither of you will be responsible for paying your debts.
- Bankruptcy during a divorce. If bankruptcy and divorce proceedings are happening simultaneously, you don’t need to worry about your dischargeable marital debt as they will be under bankruptcy protection. You only need to worry about secured debts that need to be paid while the process is ongoing.
- Bankruptcy after divorce. If you are not in a good relationship with your spouse anymore, waiting for bankruptcy discharge before a divorce could mean you don’t have to deal with them anymore and worry about paying your debts together. The bankruptcy court discharge will already wipe out your debts before you go on separate ways. Starting anew with a clean slate is just around the corner without having to depend on your spouse.
Qualification for Chapter 7 Bankruptcy (Means Test)
- Bankruptcy before the divorce. If both you and your spouse are working and your combined income is above the state of Michigan’s median income, you may fail the means test. If your household also has a high disposable income, this can lead to difficulty in passing the means test. Meanwhile, there are Marital Adjustment Deductions you can avail of together to help you qualify.
- Bankruptcy during a divorce. Evaluate carefully what type of bankruptcy will you file. If you will qualify for Chapter 7 even if your divorce hasn’t been finalized yet, then go ahead. But if you are not eligible, but will be eligible after the divorce settlement, then it’s best to delay filing until the divorce is concluded.
- Bankruptcy after divorce. If passing the means test for Chapter 7 bankruptcy is not feasible due to your above median income as a couple, waiting after divorce is the best solution. The means test takes into consideration your household size and income. Splitting it into two different households may qualify you for Chapter 7. It can lower your income to meet the below median income requirement and lessen your disposable income.
Chapter 7 vs. Chapter 13 Bankruptcy
- Bankruptcy before the divorce. If you filed for Chapter 13 joint bankruptcy, that would mean entering into a joint repayment plan that is expected to last between three to five years. If you are parting on good terms and don’t mind having a shared repayment plan, then you can opt for it. But if not, it’s best to finalize your divorce before filing for bankruptcy.
Filing for Chapter 7 bankruptcy before divorce should not be challenging since it will provide you both with the opportunity to wipe out your debts before separation. The only potential disadvantage of filing for Chapter 7 bankruptcy before divorce is passing the means test.
- Bankruptcy during a divorce. A Joint Chapter 13 bankruptcy poses a challenge in dividing the payment under your repayment plan during a divorce. You can request the court to reduce the repayment amount under your plan or ask the court to have a joint case divided into two separate proceedings.
Chapter 7 wipes all marital disposable debts hence you don’t need to worry after the discharge.
- Bankruptcy after divorce. During the divorce case, the family law judge will release a division of property and debt order for you and your ex-spouse. If the divorce judge ordered your ex-spouse to pay a joint debt and received bankruptcy discharge after, the debt does not simply go away. The bankruptcy court can discharge your ex-spouse in paying your unsecured debts like medical bills or credit cards as previously ordered by the family law court. But, not yours.
The bankruptcy court will only prevent creditors from collecting payments from your ex-spouse, but his bankruptcy discharge does not cover your debts. Hence, creditors can still come after you to collect payment on your debts. It’s also not feasible to force your ex-spouse to repay your joint debt as ordered by the family law court during your divorce. A bankruptcy court order for your ex-spouse’s discharge supersedes the divorce court order.
In addition, a Chapter 7 bankruptcy is usually faster than a Chapter 13 bankruptcy proceeding.
Michigan Bankruptcy and Divorce: Alimony and Child Support
Regardless of the timing of the bankruptcy and divorce petition, alimony and child support will remain constant. No bankruptcy case will wipe out this responsibility. The family law court will determine the child support and alimony obligation during the divorce proceedings.
If a spouse has failed to comply with alimony and child support obligations and incurred overdue debts, Chapter 13 bankruptcy court can help reduce the future child support payments or alimony, taking into consideration the material and substantial change in his circumstances. The overdue payments can also be included in the repayment plan.
If you need clarification or you have issues about alimony and child support, contact your experienced bankruptcy and divorce attorney in Michigan immediately.
Call our Michigan Bankruptcy Attorney Now!
Whether you file for bankruptcy before, in the middle, or after divorce, it still leaves a scar in your life. What you will want to do is go with the option that will leave you less hurt and broken. The process will not be easy but assistance from a bankruptcy lawyer can make this journey more bearable.
At Hammerschmidt Stickradt & Associates, we understand the complexities and emotional stress this situation is causing you. Our savvy bankruptcy attorneys know the adverse consequences of every wrong move in this process and will ensure to properly review your circumstances and determine which approaches will cater to your needs with the least impact.
Bankruptcy and divorce are roads anyone wouldn’t wish to travel on their own. And that is why Hammerschmidt Stickradt & Associates are here to ensure you that we will be here for you. Reach out to us now and let’s begin paving new roads for you to walk on!