Bankruptcy In Marriage
The most important decision when filing for bankruptcy as a married couple is whether to file jointly or separately. Filing jointly signifies that both spouses will apply jointly, claiming debt liability and asset protection under the bankruptcy laws. Filing separately means that only one spouse will claim bankruptcy liability and protection, leaving the non-filing spouse vulnerable if not handled with care. The optimal form of filing depends primarily on the status of the debts. If the majority of debts were acquired during the marriage or are joint debts, registering jointly may be the best option. However, if one spouse owns the preponderance of the debts or accumulated them prior to the marriage, filing separately may be the best option.
Both spouses are protected from creditors, debt collection actions, and the risk of asset seizure or liquidation when petitioning jointly as a married couple. Not only will both spouses be protected by bankruptcy, but the mutual debts will be resolved with little possibility of further creditor collection. However, filing jointly does result in both spouses suffering credit consequences for the delinquent debts and having the bankruptcy listed on their credit reports. The benefit of submitting separately in a marriage is avoiding credit damage to the non-liable spouse due to the filing spouse's delinquency on a debt. However, applying jointly leaves the non-filing spouse vulnerable to creditors who decide to pursue collections after the other spouse's discharge. This means that the non-filing spouse may be subject to credit collection efforts on a debt for which they are not liable, but which is still legally collectible.
Bankruptcy After A Divorce
The most difficult aspect of filing for bankruptcy after a divorce is the division of debts and assets during the divorce. If any debts remained undivided, creditors may prosecute both parties for full liability over the debt. This means that if one spouse does not file for bankruptcy, creditors can hold the non-filing spouse solely liable for the debt. Additionally, any assets distributed to the non-filing spouse may be subject to seizure or liquidation. The best way to avoid unwarranted consequences for the non-filing spouse after a divorce is to have the debt and assets divided explicitly in the divorce decree.""
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