Deciding when to file for bankruptcy in South Dakota, before or after a divorce, is a tricky situation with major financial and legal consequences, and it really depends on your unique circumstances. Since there is no one-size-fits-all answer, it is in your best interest to seek advice from our qualified Rapid City Bankruptcy Lawyers to figure out the best path forward.
What Happens if I File for Bankruptcy Before My Divorce in SD?
In South Dakota, married couples often share debts such as credit cards, personal loans, and medical bills. Filing for bankruptcy jointly can allow both spouses to eliminate these shared financial obligations simultaneously. Discharging joint debts before divorce can prevent creditors from pursuing either spouse, ensuring one isn’t burdened by the other’s financial obligations.
It should be noted that South Dakota is an equitable distribution state, which means that marital property is divided fairly, not necessarily 50/50. When you file for divorce before declaring bankruptcy, your assets will likely be subject to South Dakota’s exemptions that protect certain assets from creditors. The homestead exemption can safeguard your primary residence from liquidation in a Chapter 7 case. Additionally, retirement accounts and personal property can be shielded up to a specific limit. A joint filing can help you protect more assets through increased bankruptcy exemptions.
By filing for bankruptcy before divorce, you can resolve joint debts, reducing future conflicts and simplifying asset and debt division during divorce proceedings. A joint filing is typically more cost-effective than two separate filings after the divorce. Furthermore, if your combined income renders you ineligible for Chapter 7, a joint filing before the divorce may enable you to qualify.
What Happens if We File Separately After the Divorce?
While not ideal for every couple, filing for bankruptcy before divorce can be strategic if you are both burdened by overwhelming debt, want to simplify divorce negotiations, or neither party wants to inherit previous credit card debt. Nevertheless, if you cannot cooperate or if your finances will change significantly post-divorce, filing after the divorce may be a better option.
Filing for bankruptcy after the divorce can offer several advantages. First, it can grant you more control of the process. This is because you no longer have to coordinate with your ex. You will be able to decide when to file, which bankruptcy chapter to file, which attorney to hire, and more. Another key benefit is that your individual income may make it easier to qualify for Chapter 7, as eligibility is typically income-based. During a marriage, a couple’s combined income is considered to determine eligibility.
Nevertheless, a divorce settlement clearly defines who is responsible for which debts, simplifying the individual bankruptcy filing process. The timing also helps avoid potential delays to the divorce proceedings that could occur if bankruptcy were filed beforehand.
While filing for bankruptcy before or after a divorce is a difficult decision, understanding the implications of it is crucial for your financial future. Given the complexities, consulting with an attorney at 605 Bankruptcy is in your best interest. Our legal team is prepared to guide you through this process. Contact us today to schedule a consultation.
