File For Bankruptcy In Florida Without Your Spouse
If you are married and are considering filing for bankruptcy on your own the form you choose is important. You can file for both Chapter 7 and Chapter 13 if you meet the criteria. The one that is best for you depends on a few different things. In both cases, the courts consider both spouses income. In Chapter 7, in which debtors liquidate assets to pay off debts, if both incomes exceed the income level set by law, you may not qualify for this type of bankruptcy.
Alternatively, Chapter 13 may offer debt relief for you or your spouse. In this type of debt relief, a trustee sets up a monthly payment plan to pay down your or your spouses debts. The amount of the payment depends on both spouses incomes.
Special Consideration For Tenancy By The Entirety States
Certain states, such as Florida, allows married couples to own property as tenants by the entirety as a single marital entity. Tenancies by the entirety property may be exempt in bankruptcy where there are joint debts and only one spouse files. However, if both spouses file for bankruptcy, the entireties exemption will not protect the property from creditors or the Trustee.
When Does It Make Sense To File For Bankruptcy Before Marriage
You may want to file for bankruptcy before marriage if you have an unmanageable amount of debt and your soon-to-be spouse does not. By filing for bankruptcy before you marry, you’ll likely minimize the damage to your spouse’s financial health.
In addition, if you’d like to file for Chapter 7, also known as a liquidation bankruptcy, filing before marriage is generally the better option. If you get married after you file, your spouse’s income will be considered in addition to yours, which may push you over the Chapter 7 income limit.
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Things You Should Know If You Are Married But Want To File Bankruptcy Alone
| Oct 18, 2017 | Uncategorized
This post lists three things you should know if you want to file for bankruptcy without your spouse. Contact Phoenix Law for more information today.
Using bankruptcy to help you get out of debt is something you could consider if you are overwhelmed with bills you cannot pay. If you are married, but you are considering filing individually, without your spouse, here are some of the main factors you should know before you sign the bankruptcy documents.
1. You Can File Individually If You Are Married
Married couples have the freedom to file for together or individually. Couples typically file together when they have joint debts, but spouses can file by themselves if they choose to.
There are several reasons a spouse might want to file individually, and you might have your own reasons. For example, if you want to buy a house in the near future, you could prevent damage to your spouses credit if you file individually, and put the house in only your spouses name.
If both spouses want to file for bankruptcy, it is always better to file jointly. By filing jointly, you can pay just one filing fee and one fee for the legal assistance from a lawyer.
However, it is important to understand how filing individually could affect your spouse, and you can find out more about this by meeting with a bankruptcy lawyer.
2. Joint Debts Do Not Get Fully Discharged
3. Your Spouses Income Counts
Which Debts Are Discharged
Your bankruptcy discharge eliminates your obligation to pay your dischargeable separate debts and joint debts. Your discharge does not affect your spouse’s responsibility toward any joint debts. This means that your spouse is responsible for paying back his or her separate debts and is still on the hook for any joint debts you had together.
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When Should I File Bankruptcy Without My Spouse
In contrast, you might want to have only one spouse file for bankruptcy if the debts are clearly separated out and only one spouse has the majority of the debt. Having only one spouse file can provide a strategic benefit for a bankruptcy case. It can allow the non-filing spouse to preserve their credit, so that the couple can still get access to lending if needed.
Also, in some instances, when only one spouse files for bankruptcy, the filer is effectively allowed more exempt property .
Filing For Chapter 7 Bankruptcy Without Your Spouse
Chapter 7 is considered a liquidation filing. In other words, nonexempt assets are sold to pay off as much debt as possible. Debt is discharged, and the filer lives with the hit on the credit report and score for the next 10 years.
A means test is required when filing Chapter 7 bankruptcy it basically determines if you qualify for Chapter 7. Its based on household income from six months before filing the petition. If the couple shares the same house, your spouses income must be included in the means test, even if you filed on you own. Expenses that do not benefit the household can be subtracted from the spouses contribution to the household income. More on that to come.
Once Chapter 7 is filed, an automatic stay is put in place. This legal action stops garnishments, foreclosures, repossessions and any debt collection lawsuit. But the stay only applies to the individual who files. If there is any joint debt shared by the couple, the spouse continues to remain responsible for that debt.
Its important to know if you live in one of the nine community property states. If so, the automatic stay extends to the community property of the couple that was earned or acquired during the marriage. This typically means the non-filers wages cannot be garnished for community debt in those nine states.
Once the Chapter 7 filing is discharged, the only person protected by the discharge is the individual who filed. The non-filing spouse remains liable for any joint or co-signed debts.
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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 spouse’s 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.
Does Community Debt Exist
Although some people also refer to debts incurred during the marriage as community debts, there really is no such thing. The spouse that incurs the debt is the one that is liable for it.
There are a few exceptions that usually arise when the non-filing spouse gets the benefit when the debt was used to acquire necessities.
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Are There Benefits To Filing For Divorce Before Filing For Bankruptcy And Vice Versa
There is significant interplay between divorce and bankruptcy, because spouses usually have a joint obligation on a number of debts. It will be an individual analysis, based on the particular circumstances of the person considering filing. Some debts that arise from separation, such as alimony and child support, are non-dischargeable. However, other debts, such as equitable distribution, can be dischargeable in some circumstances. It is encouraged to consult with both divorce counsel and bankruptcy counsel to evaluate the individual circumstances, in terms of bankruptcy timing.
If My Husband Or Wife Files Bankruptcy Do I Have To File Bankruptcy Too
No. There is nothing that requires a married couple to file bankruptcy together. Each spouse can make his or her own decision about whether to file bankruptcy, and each spouse has the right to file bankruptcy without regard to whether his or her spouse files.
However, married couples often file bankruptcy together . Most commonly, this is because married couples either have joint debt or they each have debts of their own that they want to discharge. It saves time, money, and effort to file a joint bankruptcy petition.
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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.
What Is The Effect On The Automatic Stay When Only One Spouse Files
The automatic stay protects you from creditors as soon as your bankruptcy case is filed. It stops almost every legal action, including a garnishment, foreclosure, repossession, and any debt collection lawsuit.
When you file for Chapter 7 bankruptcy, the automatic stay only applies to you. If you file without your spouse, theyâre not protected. If you file a Chapter 13 bankruptcy, there is a co-debtor stay, which protects anyone else listed on your debts.
In a community property state, the automatic stay extends to the community property of married couples. This generally means that the non filing spouseâs wages canât be garnished for a community debt.
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Filing Bankruptcy Without Your Spouse In Arizona
Spouses typically apply for loans and credit cards jointly, in both of their names. This makes each of them contractually liable for the debt. But occasionally debt is taken out in only one spouses name during marriage. In these situations, the spouse named on the debt is contractually liable for the debt, and the other spouse is not. People often mistakenly assume this means the un-named spouse has no liability for the debt, and therefore need not consider filing bankruptcy if the debt isnt paid. Unfortunately, that is not a correct assumption here in Arizona.
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.
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What Happens If Someone Files For A Bankruptcy In The Middle Of A Divorce
In most instances, divorce actions are not subject to the automatic stay which often comes out of bankruptcy filings. However, there can be situations where the automatic stay may impact the proceedings in a divorce. Depending on the circumstances, the bankruptcy could temporarily forestall progress in the divorce action.
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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Should We File For Bankruptcy In Florida Jointly
If you are unsure whether tofile for bankruptcy with your spouse or on your own, you should get in touchwith an attorney. By working with someone who knows their way around the legalsystem and has experience dealing with cases like yours, you can increase yourchances of a good outcome.
Want to learn more? Contact us today so that we can discuss your case before you file for bankruptcy in Florida.
Reasons To File Without Your Spouse
Circumstances that may make it wise to file without your spouse include:
- You keep all finances separate, and have documentation to prove that
- There is a prenuptial agreement
- Debts are in your name only
- Your spouse already has filed bankruptcy and is not yet eligible for a discharge
- Your spouse may soon be receiving an inheritance
- You want to ensure your spouse has the ability to file in the future, if needed
For example, if the debt truly is the husbands alone and not his wifes, filing without your spouse in most cases will protect her credit score. However, the credit score may be negatively impacted if there are joint assets and the ripple effect of bankruptcy makes it impossible or challenging to stay current on those debts. Your spouse remains just as responsible for those debts.
Your state of residence also affects the decision, especially if it is one of the nine community states . In community states, all marital assets become part of the bankruptcy estate, which is automatically created on filing. It consists of both husband and wifes property and assets, which means assets in the spouses name are part of the proceedings.
Careful assessment of your financial situation and the local rules all come into consideration.
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Common Law Property States
In common law property states, any assets that your spouse acquired separately during the marriage are not considered part of the bankruptcy estate.
This means that their individual assets will be protected.
For jointly owned property, only your share of the property will be used to pay back your creditors.
However, if the property cannot be divided, these jointly owned assets can be sold by the bankruptcy trustee to pay off your debt.
The trustee will then pay your spouse their share of the proceeds, while your share will be used to pay off your debts.
What Happens When One Spouse Files Bankruptcy Without The Other Spouse
There is no requirement that a husband and wife jointly file bankruptcy. If most debts are owed only by one spouse, it may be appropriate for that spouse to file for bankruptcy alone. However, if one spouse does file for bankruptcy in order to discharge debts, the other spouse may be held responsible for repayment of some debts, such as jointly-owned credit card debt or medical debt. This is a difficult and tricky legal situation to navigate, and it is in your best interest to contact a knowledgeable bankruptcy attorney in order to determine what each person’s liability will be.
If the indebted spouse has most of the debt in his or her name alone, joint filing may not be the best option. The other spouse is not responsible for paying off the debt. Also, it may be the case that the spouse who is not in debt has numerous protected assets or may stand to inherit a great deal of money. In that situation, a joint filing may not be advisable.
A joint bankruptcy filing may be the best option if the non-insolvent spouse has few resources or has all his or her assets intermingled with the filing spouse. Filing jointly avoids unpleasant situations where the creditors attempt to reclaim the filing spouse’s debts by going after the non-filing spouse’s assets. Filing jointly for bankruptcy often affords couples a more simple financial transition.
It is in your best interest to discuss your choices with an experienced bankruptcy attorney in order to determine what your best options are.
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Will My Bankruptcy Affect My Spouse’s Credit
Typically, no. And it’s fortunate because preserving one spouse’s good credit for future expenditures is a sound financial strategy. It’s also one of the factors married couples consider when deciding whether to file for bankruptcy jointly.
But an individual filing doesn’t always work well. It’s a good strategy when you don’t have joint debts and when your spouse doesn’t need financial relief from separate obligations.
What Assets Are Part Of The Bankruptcy Estate In California
California is a community property state, which means that barring an agreement to the contrary, property acquired during the marriage normally belongs to both spouses no matter whose name is on the title. That means whether you file a bankruptcy jointly with your spouse or you file individually, all that community property is part of your bankruptcy estate. When you file individually in a community property state like California, a lot more property becomes part of the bankruptcy estate and subject to bankruptcy law than would be the case if you filed individually in a common law state. Your California bankruptcy lawyer can explain what property can be protected by bankruptcy exemptions.
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The Bankruptcy Community Discharge
The bankruptcy discharge is a court-ordered injunction prohibiting collection of pre-petition debt. It permanently bars creditors from pursuing the debtor who filed bankruptcy for payment. But what about the non-filing spouse of the debtor? Can creditors still pursue him or her for collection on debt that was incurred during marriage?
In the bankruptcy world, there is something called a community discharge. Even when only one spouse files a bankruptcy petition, the marital community also receives a discharge. This means that the marital community is protected from the claims of creditors for debts included in the bankruptcy. For example, the non-filing spouses wages cant be garnished because his or her wages are community property. Likewise, creditors cannot reach a bank account holding community funds. However, the protection for the marital community does not extend to the non-filing spouse personally. Creditors can still collect against any separate property owned by the non-filing spouse.
Below is a hypothetical to illustrate how a non-filing spouses separate property is at risk following a community discharge: