Navigating Bankruptcy During Your Illinois Divorce 

 Posted on May 21, 2024 in Divorce

Going through a divorce is a profoundly challenging experience, and if you couple that with the financial turmoil of bankruptcy, it can feel like an insurmountable mountain to climb. However, understanding how to navigate both simultaneously in Illinois can help ease the stress involved. If you are currently juggling both divorce and bankruptcy proceedings, it is imperative you secure legal representation. Your attorney will ensure that you are able to face both challenges head-on, giving you a fair opportunity to get through each process and ultimately move on with your life.

Understanding the Basics of Divorce and Bankruptcy

Before discussing how each of these processes affects each other, it is essential to have a complete understanding of the fundamentals. In Illinois, divorce laws are under state family courts' jurisdiction, while bankruptcy is governed by federal law. The bankruptcy process involves either Chapter 7, which is liquidation, or Chapter 13, which involves the re-organization of debt. Divorce involves the dissolution of marriage, dividing assets and liabilities, and potentially dealing with child custody, along with other important issues. Both processes require careful planning, which makes legal guidance an absolute necessity. 

Timing is Everything: When to File?

One of the most important elements when navigating both divorce and bankruptcy is timing. Should you file for bankruptcy before or after your divorce? Filing for bankruptcy before the divorce may simplify the division of debts and assets, as the bankruptcy court will handle the discharge of eligible debts. However, this approach requires some cooperation between spouses, which is not always realistic in divorce. On the other hand, filing after the divorce can address financial issues individually but may complicate matters involving jointly held debts. Consulting with an attorney to evaluate your specific situation is highly recommended. 

Types of Bankruptcy and Their Implications

Choosing between Chapter 7 and Chapter 13 bankruptcy is another pivotal decision with significant implications for your divorce. Chapter 7 bankruptcy can potentially eliminate most unsecured debts relatively quickly. However, you may lose certain assets, impacting your post-divorce financial planning. Meanwhile, Chapter 13 bankruptcy involves a repayment plan over three to five years, which can provide more structure but also requires a stable income to manage effectively. Each option affects asset division and financial obligations differently. Understanding these nuances is a challenging task, which is another reason obtaining legal guidance is critically important. 

Impact on Asset Division and Support Obligations

Bankruptcy can complicate the division of marital assets and liabilities. Assets classified as exempt in bankruptcy may not be divided in the divorce, while non-exempt assets can be sold off to pay creditors. Additionally, it is important to understand that certain obligations arising from a divorce, like alimony and child support for instance, are generally not dischargeable in bankruptcy. This means those obligations will need to be fulfilled despite the bankruptcy filing.

Get in Touch with Our DuPage County, IL Attorneys to Schedule a Private Consultation

You do not need to go through this process alone. Hiring an attorney is a wise decision, not only for pursuing a favorable outcome in both divorce and bankruptcy proceedings but also for your own peace of mind. To learn more about how the Wheaton, IL divorce lawyers at The Stogsdill Law Firm, P.C. can help, contact our office at 630-462-9500 for a private consultation today.