Whether married couples decide to file personal bankruptcy individually or jointly can be a complicated question. Sometimes a spouse that has single-handedly accumulated significant debt may wish to file for bankruptcy to discharge debt while their spouse, who has little debt of their own, may not want to be held responsible by taking part in the bankruptcy process. Because marriage conveys joint responsibility for some debt under bankruptcy, it is important to work with an experienced bankruptcy lawyer to decide what the best approach is for your unique situation.
Is it better to file bankruptcy with a spouse or without?
An individual can file for bankruptcy with or without their spouse. When considering whether to file individually or jointly, it is important to consider what type of debt you have, who the debt belongs to, and whether filing individually or jointly will accomplish your financial goals.
Debt Accumulated Before or After Marriage
For example, if a person considering bankruptcy accumulated debt prior to the marriage, they are likely the only one who owes the creditor so the other spouse is not liable for the debt. However, if debt was accumulated during the marriage, it may be that you and your spouse are both responsible for paying the debt. Medical debt is a good example of debt that is viewed as jointly owed debt if accumulated doing the marriage.
Credit Card Debt and Personal Loans in Both Names or One?
If a couple has personal loans, student loans or credit cards issued under only one spouse’s name, that spouse is responsible for the debt in bankruptcy. The other spouse is not legally required to pay and, therefore, does not need to be part of the bankruptcy even if the personal loan or credit card was taken out during the marriage. This differs from the divorce process where both spouses share the responsibility for “martial debt” regardless of whether debt was accumulated on individual or joint accounts.
The Goal of Bankruptcy
The goal of bankruptcy is financial relief. If debt is mostly in one spouse’s name, filing individually may achieve the goal of eliminating debt while protecting the other a spouse’s credit score. If, on the other hand, the debt is jointly held, filing jointly may be the best course of action to eliminate debt.
Beyond debt owed individually or jointly, another issue to consider is the financial situation of a non-filing spouse. Do they have valuable assets or stand to inherit a substantial sum of money? Joint filing may be inadvisable for a spouse with substantial assets because it puts these assets at risk under bankruptcy. However, a joint bankruptcy 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 to provide protection against creditors going after the non-filing spouse to pay off a spouse’s debt.
Contact an Experienced Bankruptcy Lawyer for Help
Bankruptcy is a detailed process so it is important to discuss your unique financial situation with an experienced bankruptcy attorney. When you have questions on whether it is better to file bankruptcy with or without your spouse, contact bankruptcy attorney Charles E. Covey for for answers at 309-674-8125.