Divorce & Bankruptcy: A Tricky Combination

Puzzel child

Unfortunately, not all marriages are forever, and one of the leading causes of divorce is finances. Often a couple dissolving their marriage will consider bankruptcy. However, timing can be everything as combining these two complicated proceedings can make both proceedings more complicated.

Chapter 7 vs. Chapter 13 Bankruptcy

Chapter 7 bankruptcy greatly reduces or discharges unsecured debt. Chapter 13 bankruptcy is a three-to-five-year payment plan that is set up if person/people make too much money for Chapter 13 OR if they are trying to save house or cars while settling debt. Chapter 7 and Chapter 13 bankruptcy can be filed jointly or separately.

Bankruptcy Timing

It is best to finish bankruptcy prior to filing for divorce. Sometimes, a Chapter 7 bankruptcy is filed during a divorce if parties can file jointly, and bankruptcy is the most cost effective manner to distribute marital debt associated with divorce. However, if a bankruptcy is filed, the bankruptcy will cause an automatic stay on financial property and debt division associated with your divorce.

In Chapter 7 bankruptcy, the stay will not be lifted until bankruptcy completion. In Chapter 13 bankruptcy, the bankruptcy attorney would have to request the bankruptcy trustee or bankruptcy Court to lift the stay to conclude the divorce.

If a divorce occurs during a Chapter 13 bankruptcy, the bankruptcy would be complicated as the divorce decree has no impact on the debt arrangement associated with the bankruptcy, so it is necessary that the debt arrangement continues even though the debt payment will likely be modified by the vulnerable finances that result following a divorce.

Divorce Concerns with Chapter 13 Bankruptcy

The judge in any divorce or dissolution must determine a fair and equitable property/debt division. Since a completed bankruptcy will affect property and debt, many divorce courts stay the divorce case regardless of the bankruptcy court lifting the stay. Often, whether a divorce can be finalized with a pending divorce is a case-by-case basis.


If you are considering bankruptcy and divorce at the same time, it is essential to have your bankruptcy attorney work with your domestic relations attorney to determine the best method of dissolving your marriage in the most efficient manner without jeopardizing your bankruptcy. Attorneys at Smith & Smith Law Office have resources to help if you are in this situation.