With money problems being a leading factor in divorce, it's not surprising that bankruptcy and divorce often go hand-in-hand. When it comes to filing for bankruptcy and divorce, which one comes first? Does it make a difference?

Whether you should file for bankruptcy before or after the divorce depends on a variety of factors; for example, what state you live in, how much assets and debts you have, and what type of bankruptcy you wish to file.

Chapter 7 or Chapter 13?

Chapter 7 wipes out most unsecured debts such as credit card debts and medical bills; with a Chapter 7, filers usually receive a discharge within a few months; therefore, a couple can complete a Chapter 7 quickly before filing for divorce.

In contrast, Chapter 13 is a "debt reorganization" bankruptcy which takes 3 to 5 years to complete. If you're planning on filing a Chapter 13, it may be more advantageous to file individually after the divorce since it takes so long to complete.

Simplifying Property Division

One benefit of a Chapter 7 is that you get to wipe out your debts jointly. This will simplify the property and debt division process during divorce.

Some states allow spouses to double the property exemption amounts if they file jointly, thus, you'll want to discuss your state's property exemptions with a bankruptcy lawyer.

If you own a lot of property, you may want to file jointly so you can double your exemptions, however, if your state doesn't allow you to double your exemptions, it may be better to file individually after you have divided your property through the divorce.

If you want to file Chapter 7, the decision to file before or after the divorce could come down to your income. If your joint income is too high, you may not qualify for a Chapter 7. In that case, you may have to wait until after the divorce to file for bankruptcy.