Financial conflicts rank among the most prevalent causes of divorce in Illinois. Whether it stems from one spouse’s extravagant spending habits, persistent unemployment, or the overwhelming strain of managing a household’s finances, couples often find themselves parting ways due to monetary disputes. In certain cases, the magnitude of a couple’s financial woes leads them to contemplate bankruptcy while simultaneously navigating the process of divorce.
Illinois law does permit spouses to pursue divorce and file for bankruptcy concurrently, but this decision warrants careful consideration. In this blog post, we will explore common strategies for merging bankruptcy and divorce, but it is crucial to consult with a qualified attorney to address your specific concerns.
Which do you initiate First?
The extent to which spouses have disentangled their marital ties can influence the decision to file for bankruptcy alongside divorce proceedings. If you have already separated and are independently managing your finances, this may impact your eligibility to pursue Chapter 7 bankruptcy, potentially making it advisable to postpone this process until after the divorce is finalized.
Conversely, initiating bankruptcy proceedings before divorce offers the opportunity to resolve outstanding debts and assets, expediting the asset division process during divorce while potentially reducing costs. Married couples can jointly file for bankruptcy, enabling them to take advantage of property exemptions and potentially retain a greater share of assets. Additionally, it provides the benefit of a third party overseeing debt management, which can prove invaluable in cases involving domestic violence or power imbalances.
What Occurs When Divorce and Bankruptcy Coincide?
Bankruptcy is a federal procedure and consequently takes precedence over divorce, a matter governed by state law. Bankruptcy courts possess the authority to mandate the resolution of debts before finalizing divorce proceedings, potentially resulting in delays. While divorce courts may still address non-financial aspects of the divorce, the divorce itself may remain pending until the conclusion of the bankruptcy process.