How will filing for bankruptcy in texas during a divorce affect our small family owned business?

You ask a very good question, but it is extremely complex in its analysis and result.  I will give you some preliminary comments here, but you each need to get competent bankruptcy counsel to advise you on your options. A lot depends on which bankruptcy chapter you would be filing, and there are problems with each.  In a Chapter 7 case, you are technically not allowed to continue operating any business.  Now some courts and trustees will allow you to do this in a Chapter 7 as long as you have adequate liability insurance.  So you better know your judges and trustees very well before filing a case. The value of your business assets also factors into the risks in a Chapter 7 case, because you may not be able to protect all of them, depending on what exemptions are available to you under applicable state law. In a Chapter 13, there are less issues involving the value of your assets and you are free to continue operating your business, but you have a plan term of 36-60 months for your repayment plan, and any divorce during that time will cause significant problems with completing your case, not to mention the ability of your attorney to represent either of you. What is the legal basis your friend sees and advantage for you filing bankruptcy during the divorce?  Perhaps some clarity on that point would assist in providing you a more specific answer. In any event, you need to consult with a bankruptcy attorney in your area to deal with all the issues. Mark Markus has been practicing exclusively bankruptcy law in California since 1991.  He is a Certified Specialist in Bankruptcy Law by the State Bar of California Board of Legal Specialization,  AV-Rated by martindale.com, and A+ rated by the Better Business Bureau.