Individual versus Joint Bankruptcy Filing
A major concern when individuals file bankruptcy on their own is that their non-filing spouses may become creditors' targets. Although joint bankruptcy provides more protections for each spouse, it may not be necessary for both parties to file jointly. Several factors, including but not limited to the amount of debt acquired by the community, the nature of those debts, sources of income, the nature of the couple's property, and the state in which they reside, determine whether a couple should file a joint petition or an individual bankruptcy.
2. Debts During Marriage and Joint Debts
To determine whether to file jointly or individually, one must determine how the relevant debts were incurred. It is important to keep in mind that the non-filing spouse may be liable for certain debts acquired during the marriage, despite the fact that marriage is not a prerequisite for shared liability of such debts. Generally, the non-filing spouse is liable for any debts he or she signed or co-signed. If the majority of the debt to be discharged belongs to one spouse, a joint bankruptcy petition can typically be avoided.
3. Finances-Related Considerations
In order to file for Chapter 7 bankruptcy, an individual must pass a means test, which helps determine whether the bankruptcy is necessary. Essentially, this test assists in determining whether certain obligations can be discharged under Chapter 7 of the bankruptcy code or whether they must be repaid over time under Chapter 13. A combined household income is considered under the means test, even if only one member of the household is submitting individually.
4. A single petition for bankruptcy will not shield the other.
If only one spouse files for bankruptcy, the couple's joint debts must be paid to prevent future creditor litigation or actions. Filing for bankruptcy by only one spouse provides no guarantee or protection for the other spouse.
5. Property Issues During Insolvency
If you reside in a community property state, all property acquired by the spouses during the marriage is considered jointly owned. Therefore, despite the fact that the non-filing spouse's separate property is secure, all community property is at risk in bankruptcy.
Credit Implications of Bankruptcy
Even though each spouse has his or her own credit report, creditors may still report bankruptcy on the spouse who did not file. This may affect both spouses negatively in the future if they submit a joint credit application.
As evidenced by the preceding, managing bankruptcy when a spouse is involved is more complicated than handling bankruptcy as an individual. For more information about bankruptcy and marriage, please visit :""
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