Arizona residents who are contemplating filing for bankruptcy might be wondering whether they should do so before they file for divorce or not. This is a valid concern, especially for individuals whose names are on the mortgages for the residences they share with their spouses. According to an expert, it is wise for individuals to resolve as many issues as they can before they file for their divorces.

The first thing that people wanting to file bankruptcy and divorce should do is determine whether or not they live in an anti-deficiency state. An anti-deficiency state does not hold individuals liable for mortgages on properties they purchased as their primary residences. The deficiency on a mortgage is what is still owed on it after the property sells at a foreclosure option. Some states hold individuals liable for the deficiency on their foreclosed properties whereas other ones don’t. People who live in states where they will be liable for the deficiencies might want to consider filing Chapter 7 bankruptcy.

Chapter 7 bankruptcy will not only discharge people of the deficiencies on their mortgages, but it also discharges them of other debts like credit card debts and personal loans. After people who are eligible for Chapter 7 bankruptcy file it, then they should file for divorce. However, they should take care to make sure that they don’t reassume some of the debt that they have wiped off with their bankruptcy in their divorce settlements. For example, bankruptcy can relieve an individual of a certain debt, yet if he or she agrees to pay that debt as a stipulation of his or her divorce settlement, then he or she is liable for the debt again.

Bankruptcy Attorneys might be able to assist people in gathering all the documents needed to file their bankruptcy claims. They might also be able to help them ensure that they file their bankruptcy correctly.

Source: Fox Business, “Which should I file for first: Divorce or Bankruptcy?“, Justin Harelik, July 10, 2013