A bankruptcy filing is a provision under federal law that provides debt relief to those who need it the most. The process can be more difficult and complicated in instances where a spouse is involved.
Prior to embarking on the long treacherous process, married couples should have a basic understanding of possible outcomes. You should also consider taking a Chapter 7 Means Test Calculator or estimate your Chapter 13 Repayment Plan. These calculators will help you determine whether you qualify along with comparing debt relief options. There are many debt relief options .It’s important to weigh all your options and know the pros and cons of each option. You may find that you do not even have to file a bankruptcy.
Can I file for bankruptcy without my spouse?
Under federal laws, it is possible for someone who is married to file bankrutpcy individually. In this case, the court will try to ascertain whether there are joint properties or shared debts.
In case of joint debts, a bankruptcy filing by one partner is likely to affect the other partner’s credit report. Creditors are notified once the process starts. Therefore, they can still come after a spouse to collect any debts even with a bankruptcy filing.
The likelihood of a bankruptcy filing affecting a spouse also depends on property laws depending on the state. Depending on whether one partner files for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, a spouse may have to contend with some consequences.
In case of properties, Bankruptcy will not in any way affect any separate property owned by a spouse. However, it is important to note whether the jointly owned property is protected under community property state law or common law as this will determine the impact of bankruptcy.
Property owned by a spouse is usually not at risk, in cases of a bankruptcy filing by one partner, under Common Law. However, under Community Law provision, property acquired during the marriage can be used to satisfy debts in the ecase of a bankruptcy filing by one spouse.
Filing For Bankruptcy Individually
As discussed above, it is possible to file for bankruptcy individually, even if one is married. It is also possible to file for bankruptcy as a couple. Filing as a couple may be an ideal option in the case of joint properties and debts. Single persons can also file for bankruptcy.
The mode of filing depends on where a married person lives and what property they own. It is important to determine whether the property is owned individually or jointly, with a spouse. It is advisable to file for bankruptcy individually as a way of protecting the other spouse’s credit.
An individual filing is also ideal in cases where each partner in the marriage owns separate properties or assets.
Does my spousal income count towards the bankruptcy?
While filing for individual bankruptcy, it is important to note that spousal income counts even if he or she is not part of the petition. Income generated by a spouse dictates the type of bankruptcy one gets to file.
One can only qualify for an individual bankruptcy filing if their spousal income is below a certain amount under Chapter 7. For Chapter 13 filing, a spouse’s income must be above a certain income level. It is common for a bankruptcy attorney to ask for income generated by each spouse. Both incomes are used to evaluate eligibility as it pertains to the individual filing.
Is my spouse responsible for debts only in my name?
In the case of joint debts, an individual bankruptcy filing does not protect the other partner. Individual bankruptcy filing only affects personal liability. In this case, creditors would still be able to pursue the other spouse to recoup any money owed.
However, creditors cannot pursue collections on debts from a spouse when the debt is in the name of the person filing for bankruptcy.
If you live in a community property state such as Arizona or Texas, creditors can still go after your spouse’s separate property to settle part of the debts after bankruptcy. The law, in this case, assumes that all property acquired during marriage is community property.
Filing With Your Spouse
Filing for bankruptcy as couples is very much possible. In this case, both spouses file a joint petition, and a bankruptcy file is opened in the names of both parties. Married couples can file a joint petition as a way of keeping costs down. Bankruptcy attorney fees will be much lower for a joint filing as opposed to each partner fing separately.
A joint filing also tends to be more efficient as it allows married couples to complete just one petition. Both spouses also get to attend hearings together and get the opportunity to discharge all their debts on a single filing.
One of the major drawbacks of joint filings has to do with the fact that some state laws limit the amount of property that couples get to protect. Joint filings are also not ideal in instances where one spouse owns a lot of non-exempt property.
Filing for bankruptcy as married couples will always come down to the amount of property jointly owned. It also depends on the exemptions that the couples stand to enjoy.