Filing Bankruptcy Individually or Jointly |
Once you've decided to plunge ahead and file for bankruptcy and you're married, the next big decision is to determine if you should file jointly or individually. Your spouse may not want their name attached to a bankruptcy filing or doesn't think it's the right way to proceed.
There are, like everything else, advantages and disadvantages to filing jointly or individually when you're married. Both of you have probably created the debt, but each of you may have a different opinion about how to proceed.
Advantages of a Joint Bankruptcy
It's usually preferable to file a joint bankruptcy for these reasons:
Bankruptcy costs: The fees to file either jointly or separately are about the same. If your spouse files for bankruptcy separately, you'll be paying the fees again.
Joint debt: If your spouse doesn't join in your bankruptcy filing for debts you both owe, your spouse will have to continue to pay the joint debt and can be pursued by creditors like the filing hasn't happened.
Efficiency: The amount of work needed to file a joint bankruptcy is half as much as when you and your spouse file separately.
Reasons for Not Filing a Joint Case
There are several valid reasons for not filing for joint bankruptcy. One obvious reason is that your spouse does not want to participate in a bankruptcy. But, there are a few situations when a joint bankruptcy may be a bad idea or just isn't available:
- Your spouse is barred from filing because of a prior bankruptcy
- You and your spouse jointly own property that is in excess of federal exemption levels and is protected from creditors by broader exemptions under state law.
- You spouse is barred from filing Chapter 7 bankruptcy because of an objection to discharge the debt because of some type of concealment or fraudulent behavior.
- If you are pursing a Chapter 13 bankruptcy, your spouse has a large priority debt, has debt above the Chapter 13 debt limits or has some other debt problem that makes a joint bankruptcy impossible
- In some community property states, it isn't necessary for the other spouse to join in on the filing of bankruptcy since nearly all community debts and community property (i.e. any property or debts acquired during marriage) will be affected by their spouse's bankruptcy.
Joint Filing Not Guaranteed
The filing of a joint bankruptcy petition does not always guarantee that your and your spouse's separate estates (individual assets and liabilities) will be automatically consolidated. This is particularly true if one spouse has more nonexempt property than the other spouse and some or all of the debts are not joint debts. The reason is because the creditors of the spouse with more nonexempt property will not want to share those assets with the creditors of the spouse with less nonexempt property.
Also, if you're going through the means testing and you combine salaries, the both of you might make too much money to file and have your debts written off.
To determine if you and your spouse should file for joint bankruptcy, it's strongly suggested that you seek the counsel of a bankruptcy lawyer or debt counselor.
Questions for Your Attorney
- If we file bankruptcy, will all our property be affected?
- Will I be affected by my spouse's bankruptcy even if we keep our accounts separate?
- Given our circumstances, is it better to file bankruptcy jointly or separately?
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