Believe it not, you don’t have to file bankruptcy with your spouse if you don’t want to. Bankruptcy filing is associated with a social security number.
That doesn’t mean your bankruptcy won’t touch your spouse, or your spouse’s financial life. Your social security numbers are listed in certain databases as associated numbers. You may have applied for loans together. And of course, the family finances are the family finances.
Being Married Impacts the Means Test
Even if your spouse chooses not to file bankruptcy your spouse’s income will still ended to be taken into account. When you file for bankruptcy you list out your household income and expenses.
If you live with your spouse then both of your incomes and expenses get taken into account.
In addition, assets impact your ability to file Chapter 7. If you and your spouse, together, own too many assets then you may be forced into a Chapter 13 plan.
In addition, if the value of the assets exceeds your exemptions then in order to keep any assets you owe a debt you’d have to add those debts to the Chapter 13. If you file Chapter 7, those assets would be sold off to pay your debts.
If you own assets jointly, then we determine your equity interest in that property, which may differ from your spouse’s.
You Both Get Protections
Any assets that you own jointly will still be protected by the automatic stay. This can buy you and your spouse some breathing room.
The co-debtor stay ensures that the creditor may not, thanks to 11 USC Section 1301(a), “act, commence, or continue any civil action to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor.”
This means they may not repossess your car or foreclose on a house that is in both spouse’s names, nor may they sue for a debt.
When does it make sense to file bankruptcy without your spouse?
There are only a few instances where it makes sense to do this:
- The vast majority of the debts plaguing your household budget are solely in your name, especially if you took out those debts prior to getting married.
- The prenuptial agreement you signed keeps those debts well away from your spouse.
- Your spouse may receive an inheritance soon and you wish to protect it from creditors.
- Your spouse has filed bankruptcy in the past and is not eligible for a discharge.
- You want to preserve your spouse’s ability to file bankruptcy in the future.
If you have a great many joint debts the bankruptcy will have a serious enough impact on your spouse’s finances that it’s probably better to give your spouse the fresh start, too. In addition, if any property is to be sold, as in a Chapter 7, then your spouse would lose that property too. You’re generally better off wiping the slate clean together in such circumstances.
Not sure what’s right for you? Sit down with our office to go over your unique situation. You’ll get answers and solutions to your biggest financial challenges.