Do Some People Choose between Divorce and Bankruptcy?

Interviewer: When people are in the middle of a divorce situation or let’s say they’re in the middle of a bankruptcy situation, do they tell you that they’re considering one or the other?

Tanya: Sometimes, yes. Last year, I did two of both where the couple got divorced and the couple filed for bankruptcy. Both of them, however, were cases where both husband and wife were extremely cooperative. I cannot represent both parties in matters.

I only represent one person and the other person is advised to get counsel; however, the other spouse was very cooperative and understood the situation and didn’t feel like he or she was being treated unfairly so those went along smoothly. In most cases, you really need other lawyers to make sure there’s full objectivity. In all cases, the client must make a knowing waiver of their right to counsel.

Do Parties Need Separate Attorneys if They Are Filing for Bankruptcy and Initiating a Divorce?

Interviewer: Your practice handles both bankruptcy and divorce. When a client wants it, do you handle both for them or do you recommend that they hire someone else to do the other part?

A Couple Can File Jointly or Separately for Bankruptcy

Tanya: In a bankruptcy filing, a couple can file for bankruptcy together as a married couple. Once they’re not married anymore, once they’re divorced, they cannot file together anymore. A married couple does not have to file together. One person can file at a time as well in bankruptcy.

There are very straightforward bankruptcies, which are called Chapter 7 bankruptcies. Those are consumer bankruptcies. Those are what most people are used to and hear about on the news.

There May Be a Problem Continuing the Payment Plan for a Chapter 11 Bankruptcy Filed by a Married Couple Who then Divorces

One of the other kinds of bankruptcy is called a Chapter 13 bankruptcy or a Chapter 11 bankruptcy. Those bankruptcies have payment plans that go over the course of a number of years. They can go for three to five years or longer in a Chapter 11.

The problem with that is that if parties are getting divorced and they don’t have separate lawyers and they file bankruptcies together that have extended payment plans, two or three years down the line when they divorce, that could affect not only their individual rights, but the bankruptcy resolution as well.

Attorney Helfand Always Advises Couples to File for Bankruptcy Separately to Forestall Any Later Troubles Should They Ultimately Divorce

That’s why I recommend, even though it is less expensive upfront to file together. Sometimes it does make sense to file separately. Then if a divorce occurs, you can go through the divorce proceedings while the bankruptcy is ongoing. I believe it is far better in the long run for people to be at arm’s length and protect their own specific interests. This is because quite often, divorced people don’t work together as a team.

New Jersey Family Lawyer Blog - Spousal support