What Are Bankruptcy Options For Married Couples
A key question that faces married couples who are deep in debt is whether to file for bankruptcy separately or together. Couples have the option of filing a joint bankruptcy petition where a single bankruptcy case is filed for both partners. This has the advantage of costing less than filing two separate cases because only one filing fee is required. Additionally, both spouses benefit from an automatic stay that stops collection actions against both. Further, debts held jointly will be discharged through the jointly-filed bankruptcy.
One or both spouses also have the option of filing separate bankruptcy petitions. If one spouse files, only they will receive an automatic stay and only their debt will be discharged. The other spouse will not benefit from the automatic stay and will still be liable for any debts held jointly. Filing alone will work, however, if one spouse incurred debt in their name and is not burdened with jointly-held debt.
Whether you file bankruptcy alone or jointly with your spouse depends on three key considerations:
Does Filing For Bankruptcy Affect Your Spouse’s Credit
A Chapter 7 bankruptcy will remain on your credit report for 10 years from the filing date, while a Chapter 13 will be there for seven years. When you get married, your bankruptcy will be noted on your credit report, not your spouse’s, if you filed for it individually.
However, this doesn’t mean your bankruptcy won’t affect your spouse in any way. For example, if you decide to take out a mortgage together, your credit may lead to a higher interest rate and less favorable terms.
If you filed for bankruptcy jointly with your spouse, both your credit and your spouse’s will take a hit. This can make it even more difficult for you two to obtain joint credit.
Can I File Bankruptcy Without My Spouse Knowing
Yes, although for the reasons discussed herein and the significant emotional impact that bankruptcy can have on your life, as well as the practical implications of its effects on joint property, it is not generally recommended to keep a bankruptcy filing a secret from your spouse.
Additionally, even though it is legally possible to file a bankruptcy case without your spouse, you will need to include certain information about your spouse on the bankruptcy forms, which ask for household income, marital assets, life insurance policies and beneficiary information, and information about whether debts are independent or joint.
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When Joint Filing Might Make Sense
If you file jointly for bankruptcy, all property of both spouses is part of the bankruptcy estate, and all debts of both spouses are included in the filing. If both of you are facing debt trouble, either as a couple or separately, and considering bankruptcy, filing jointly allows you to put all of your information on one set of forms, pay only one filing fee, and pay only one lawyer .
Filing jointly might be the best option in certain situations, including these:
- You live in a community property state , most of your debts were incurred during marriage, and most of your property was acquired during marriage. In community property states, everything earned during the marriage and all property bought with those earnings are community property, and debts incurred during the marriage are community debts. Whether both spouses file or only one, all community property and debts will be part of the bankruptcy case. In this situation. filing jointly allows both spouses to discharge their separate debts and to take part in decisions that will affect their jointly-held property.
- Your state’s exemption laws allow spouses to double their exemptions. If doubling exemptions will allow you to keep property you would otherwise lose, filing jointly might be a good idea.
My Spouse Is Filing For Bankruptcy Now What
As Licensed Insolvency Trustees we often receive questions from the spouse or common-law partner of someone who is considering filing for bankruptcy. Along with wanting to be supportive of their partners financial rehabilitation, they often have a range of concerns about how a bankruptcy will affect their own financial standing, credit or assets. Read on to help clear the air around some frequently asked questions you may have about your spouse filing for bankruptcy:
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Effect On Your Spouses Credit
One spouse filing for bankruptcy alone will not affect their spouses credit score if the debt is only under your name. In cases of credit card debt where your spouse is the secondary or supplementary cardholder, their credit score may be affected.
You have to check the credit agreement to determine if your spouse is responsible for your debt.
Even if youre sure that your spouse is not liable for your debt, you should still ask your spouse to request a copy of their credit report after you file for bankruptcy to make sure that no erroneous negative marks are added to her credit report.
Reason To File With Your Spouse
As a general rule I recommend that if one of the married parties is filing a bankruptcy its best that both do it together. One reason is that if you file together its cleaner and cheaper. Sometimes, if you have a marital debt like medical bills, the creditor will go after the other spouse who hasnt filed. This is hard to believe but its true. The reason for this is that under Oklahoma law both spouses are responsible for the medical debt of the other. This means that if during the marriage one spouse has a medical bill the medical provider can collect from either or both the parties.
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Can I File Chapter 13 Without My Spouse
Yes, you can file a Chapter 13 bankruptcy case without your spouse, but your spouses income is included in your Chapter 13 case. Your spouse is not required to help you pay your Chapter 13 plan payment, but his or her income could increase the plan payment in some cases. Again, household income and household expenses are included in a bankruptcy case even though only one spouse files for bankruptcy relief.
However, you can use the marital adjustment to reduce the impact your spouses income has on your Chapter 13 plan payment. The marital adjustment allows you to deduct your non-filing spouses separate and personal expenses from his or her income.
You will find that the jurisdiction will view the martial deduction differently. However, some examples of items that can be included in the marital deduction are:
- Non-filing spouses car loan payments and vehicle expenses
- Debts that are in the non-filing spouses name only
- Child support and alimony paid by the non-filing spouse
- Medical expenses for the non-filing spouse
- Vacations that the filing spouse did not attend
- Cell phone bills for the non-filing spouse
- Entertainment subscriptions in the non-filing spouses name and,
- Business travel expenses for the non-filing spouse.
The marital adjustment can be challenging to use. Spouses must be careful not to misreport income and expenses because that could result in a denial of the spouses bankruptcy discharge.
When Should You File Bankruptcy With Your Spouse
It may be a good idea for spouses to file together if you both have problem debts. When you file together, you can go through the process together in a way that is mutually supportive, and eliminate your debts at the same time. Most law firms add little or no added attorney fees for filing a joint case, so its almost like going to the grocery store for a BOGO.
Likewise, even if only one spouse has the majority of the debt trouble, but the other spouse is jointly on some of the debt, it may still be a good idea to file jointly. One spouse eliminating their debt in bankruptcy does not eliminate the debt from other people who are obligated on the loans, so filing a bankruptcy together will allow you to tie up loose ends.
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Community Property In A Bankruptcy Case
Even though Ellen doesn’t file bankruptcy, all the community propertyincluding her interest in the communitybecomes a part of the bankruptcy estate.
Because they’re in a community property state, community property that is not exempt could be seized by a trustee and sold to benefit Mark’s creditors. If Ellen chooses to file bankruptcy also, depending on the state, she can apply her own set of exemptions .
Which Debts Are Wiped Out
Same as common law property states, only the spouse filing bankruptcy gets a discharge. The non-filing spouse is still liable for his or her separate debts and joint debts. However, the non-filing spouse receives an additional benefit in community property states.
All dischargeable community claims get discharged with respect to community property. This means that all community property, which is also owned by the non-filing spouse, is off limits to the discharged creditors . This benefit to the non-filing spouse is sometimes called a phantom discharge and it lasts as long as both spouses are alive and still married.
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What Happens When Just One Spouse Files For Bankruptcy
If there are any jointly held debts included in the bankruptcy petition and just one spouse files, the creditors can, and almost certainly will, come after the other spouse to collect the debt. Once you gain protection under the automatic stay, the creditors will be unable to come after you to collect the debt. If you and your spouse both signed for the home mortgage, a car, a boat or even a joint credit card, however, your spouse will be held responsible for those debts.
If all of the debts you included in your bankruptcy petition were under your name only, the creditors would not be able to seek repayment from your spouse. If you are considering bankruptcy and any of the debts you wish to include are held jointly between you and your spouse, it might be best to consider filing a joint bankruptcy petition.
How To Deal With A Car Loan When Only One Spouse Files
In a Chapter 7 bankruptcy filing there are three ways to deal with car loans:
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You keep everything basically the same including the car loan and its terms. This is called reaffirming your car loan. The debt is not discharged.
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You borrow money to pay the bank what the car is actually worth and eliminate your responsibility to pay off the rest of the car loan. This is called redeeming your car.
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You walk away from the debt and surrender the car to the bank. No matter how much you owe on your car loan, itâs eliminated by the bankruptcy discharge. You get to start fresh with a new car after filing bankruptcy.
If you have a co-signer on your car loan , you may be able to keep everything the same without signing a reaffirmation agreement. More on that in this article titled What happens to the co-signer of a car in bankruptcy in 2021?
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Joint Property Of Marriage
If you and your spouse own property together, that property may be included in the bankruptcy estate and be potentially available to pay creditors.
In community property jurisdictions such as California, both halves of the community property comes into the estate: all of the community property is available to pay community creditors and any other creditors of the spouse who has filed.
So the filing of one spouse could have significant impact on the other.
Serving Harrisonburg Staunton Winchester And Nearby Areas Of Virginia
Posted: May 1, 2017
Filing for bankruptcy can be an effective way to find relief from crippling debt and get a fresh start financially. If you’re married, you’ll need to decide whether to file individually or jointly with your spouse. Both options are allowable under law, but the right choice for you will depend on your unique financial circumstances.
Like most states, Virginia is a common law property state. This means that any assets and property in your name alone and your portion of jointly owned assets will be subject to your bankruptcy case if you file alone. In this situation, your spouse’s separate property and share of jointly owned assets will not be part of the bankruptcy case.
Keep in mind that if you file bankruptcy without your spouse, it also means that only your debts are discharged as part of the case. If you and your spouse have jointly held debts such as a joint credit card account, car loan or a home mortgage, your spouse will now be responsible for the entire debt.
There are several factors to consider when deciding whether to include your spouse on the bankruptcy filing:
The attorneys at Hoover Penrod PLC have helped many individuals and couples in the Western District of Virginia with bankruptcy cases. We’ll review your unique financial circumstances with you in order to determine whether it’s better to file jointly or alone.
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Schedule A/b And Schedule C
Schedule A/B is where you list all of your property, called assets. On Schedule C is where you claim exemptions to protect your assets from the bankruptcy trustee. Some exemption amounts can be doubled when married couples file jointly. If you have property that has non-exempt equity when claiming only your exemption, filing jointly may be the best way to protect it. This is specific to the bankruptcy laws in effect in your state, so be sure to speak to a bankruptcy lawyer about your joint assets and how to best protect them.
Filing For Bankruptcy Individually When You Are Married
As discussed above, you may be able to file bankruptcy individually while 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. You should determine whether you own the property jointly or individually with your spouse. It is advisable to file for bankruptcy individually as a way of protecting the other spouses credit.
An individual filing is also ideal in cases where each partner in the marriage owns separate properties or assets.
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Does The Licensed Insolvency Trustee Seize My Assets During My Spouses Bankruptcy
As the spouse of a bankrupt individual, separate assets you own solely are not of interest to your spouses bankruptcy estate or Licensed Insolvency Trustee.
Its important for both you and your spouse to know that filing a bankruptcy does not mean a person automatically loses assets. In BC there are a number of assets that can be claimed as exempt from seizure and are therefore safe from creditors in fact, the majority of individuals filing for bankruptcy will retain all their assets.
Who Owns The Property
There’s often a lot of confusion about who owns the property when a couple marries. You dont automatically become a co-owner of the property your spouse owned before you were married. That property will remain your spouses’ separate property, even if you live in a community property state.
The only way you can share ownership of property that your spouse owned as a single person will be for your spouse to givedeedit to you or establish joint ownership . This is especially true in the case of real estate, where you often need your spouse to formally transfer or assign it to you.
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Can I File Bankruptcy Without My Spouse
Can you file bankruptcy without your spouse? The answer is yes, filing bankruptcy without a spouse is legally permissible, although you may have to include information about your spouse on your forms, also known as schedules, when you make your petition to the bankruptcy court.
Here are some valid considerations and answers to frequently asked questions. If you file for bankruptcy without your spouse, it will typically not affect your spouses credit, unless the debts you are attempting to discharge are joint debts, meaning that you and your spouse applied for them together, such as a credit card or bank loan with both of your names on it. In this case, your bankruptcy filing may appear on your spouses credit report, and your creditors may have a second option coming after your spouse even if bankruptcy results in a discharge of your debt.
Beyond just debt, another issue for married couples to consider when evaluating bankruptcy is property owned by the spouses. If one spouse owns property in their name only and is not the spouse filing bankruptcy, it generally wont become part of the bankruptcy estate. This is especially important in Chapter 7 liquidation bankruptcies, because the non-filing spouses completely-separate property will not become part of the bankruptcy estate, will not be subject to sale to pay creditors, and can exceed any applicable Texas or federal exemption amounts that would typically be applied in order to protect the property.
Joint Debts Of The Marriage
If you and your spouse are jointly liable to a , the bankruptcy of one spouse does not relieve the other of paying the debt. Upon a bankruptcy, the creditor may look to the other spouse for payment, unless the bankruptcy case is under Chapter 13.
If the debt is a consumer debt to be paid 100% through the Chapter 13 plan, the co debtor is protected by the codebtor stay in §1301.
Generally, marriage alone doesnt make both spouses personally liable for a debt. Liability on contracts such as home loans and credit cards arises by agreement between the creditor and the debtor. Only persons who signed the loan or credit application are liable for the debt.
A joint tax return, however, makes both spouses liable for the total of the tax due.
If you have joint debts, you can expect the bankruptcy to be noted in some way on the credit record of the non filing spouse. There is uncertainty in the law at the moment as to whether it is proper to mention the bankruptcy of one debtor on the credit report of a debtor who is not in bankruptcy.
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