When you’re married, you do a lot of things together. You most likely file your tax returns together, to take advantage of bigger deductions and other incentives. You might share a bank account and own property together. You might also have debt together. Married spouses also have the option of filing bankruptcy together, if needed. But, if you’re struggling with past debts and your spouse isn’t, it’s also possible to file on your own. Contacting a professional bankruptcy attorney for advice should always be your first action, but If you’re contemplating bankruptcy in marriage, here are a few additional pros and cons to weigh when deciding whether to file on your own or jointly.
Look at Your Debt
Your debt will give you a good idea of the best way to handle bankruptcy in marriage. If you and your partner share a lot of debt, such as credit card accounts in both of your names, a jointly held car or personal loan, or even a jointly held mortgage that you’ve fallen behind on, it can make more sense to file bankruptcy together. The spouse who doesn’t file remains responsible for the debts you share. But, if you have your own debt that you brought into the marriage, such as credit cards or personal loans, and your spouse is debt-free, it’s a better idea to file individually.
There is an exception to the rule, if you and your spouse live in a community property state. Any debts you acquired after you got married are jointly held, and jointly discharged in bankruptcy, even if only one of you file.
Look at Your Property
The property you own can also influence whether filing on your own or together is a good idea. If you don’t live in a community property state and your spouse owns more property, filing without him or her can be the best way to go, as his or her property won’t be included in the bankruptcy. Of course, if you live in a community property state, anything you and your spouse acquired after you got married can be included in the bankruptcy, unless it’s considered exempt. If you live in a community property state and your partner bought nice jewelry after you got married, he or she might lose it, even if you file on your own.
Look at Income
Even if you file individually, your spouse’s income can have an impact on the type of bankruptcy you’re eligible to file. If your partner has a decent income, it might exclude you from filing for Chapter 7 bankruptcy. Income from your spouse can also influence the repayment plan developed under Chapter 13. There are exceptions, and you might be able to deduct certain amounts of your partner’s income when completing the bankruptcy paperwork.
Pre-filing counseling is a requirement before you can file for bankruptcy. During counseling, you’ll review your budget, income, and debt to see if bankruptcy is really the best choice for you. You can also use the counseling session to determine whether you’re better off filing alone or filing jointly with your spouse. If you’re the only one with debt, an individual filing can be the better option in the long run— as it leaves your spouse’s credit intact and can allow you to pick up the pieces afterwards quickly.
Image Source: Pixabay
Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY