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Filing for Bankruptcy in Florida Before Divorce: Protecting Joint Property from Individual Creditors


Navigating through financial instability can often feel like steering a ship amidst a storm, and when paired with the emotional whirlwind of divorce, it can seem insurmountable.

However, imagine if there was a way to helm this storm while protecting your jointly-owned assets. In Florida, individuals facing debt coupled with impending divorce can consider filing for bankruptcy before untangling their marital bonds. This tactic could potentially safeguard your joint assets using the provision of tenancy by the entireties exemption.

Let’s explore why this might be a prudent strategy for protecting your assets and paving the way for a fresh financial start.

Understanding the Tenancy by the Entireties Exemption

Florida law acknowledges a distinct property ownership type called tenancy by the entireties. Initially conceived to provide equal property rights to both spouses, this legal concept presumes that any property acquired by a married couple is jointly owned.

Both spouses have an equal and indivisible interest in the property, and it cannot be unilaterally sold, transferred, or seized by an individual creditor of one spouse. It applies to various properties – from homes and vehicles to bank accounts. Essentially, it constructs a protective fortification around your shared properties.

  • Advantages of Filing for Bankruptcy Before Divorce: Preserving Joint Property: Florida couples can leverage the tenancy by the entireties exemption by filing for bankruptcy before divorce. This exemption shields the joint property from individual creditors during bankruptcy proceedings, providing an essential line of defense for shared assets, especially when one or both spouses have accrued substantial debts.
  • Simplify Asset Division: Divorce proceedings necessitate the division of marital assets and debts. By filing for bankruptcy before divorce, couples can discharge or reorganize their debts under Chapter 7 or Chapter 13 bankruptcy, each providing different benefits depending on the couple’s financial circumstances. This step simplifies the asset division process, facilitating a smoother distribution of remaining assets without the complicating factor of substantial debts.
  • Fresh Financial Start: Bankruptcy offers a pathway to a fresh financial start by eliminating or restructuring debts. Filing for bankruptcy before a divorce can provide emotional and psychological benefits as spouses confront their joint financial burdens, potentially reducing financial pressures that often contribute to marital strain. The post-divorce period becomes more manageable when debt is already addressed.

Important Considerations

Taking the step to file for bankruptcy before divorce is not a decision to be taken lightly. Significant factors require careful contemplation to ensure you’re setting the course for an optimally secure financial future.

Here are two of your most significant considerations:

  • Timing: The timing of filing for bankruptcy in relation to divorce may be more important than you realize. Filing after divorce may result in the loss of the tenancy by the entireties exemption because the property ceases to be jointly owned. Also, the timing could affect child custody and support decisions.
  • Financial Impact on Divorce: Although filing for bankruptcy before a divorce can simplify asset division, it’s important to understand its impact on divorce proceedings. Bankruptcy courts can review and approve divorce settlement agreements to ensure compliance with bankruptcy laws and creditor rights. Collaboration between bankruptcy and family law attorneys is advisable to navigate these intricate legal intersections.