If you're married and thinking about filing for bankruptcy, you may be wondering whether both you and your spouse have to file bankruptcy together. There is no law that requires spouses to file a Chapter 7 or Chapter 13 bankruptcy together. Whether you should file a joint bankruptcy or single petition depends on several different factors including the amount of community debt involved, how assets are held, income, and more. Here are some factors to consider if you're trying to decide whether to file a joint bankruptcy or to file alone:
What Debts Are You Trying to Wipe Out?
One of the first things you should consider is which debts you're trying to discharge. Through a joint bankruptcy, you should be able to discharge all of the debts both you and your spouse owe. However, if only one spouse files for bankruptcy, the spouse that doesn't file is still responsible for paying his or her own debts as well as any joint debts. Therefore, if you have a substantial amount of joint debt, filing for joint bankruptcy may be the better option.
On the other hand, if you have few or no joint debts but your spouse has a lot of individual debt (or vice versa), then it may not be in your best interest to file for bankruptcy together. In this case, your spouse could file for bankruptcy individually in order to wipe out his or her own debts. This leaves you with the option to file for bankruptcy later if you really need it. Or, even more important, there may be a reason why you should strategically file for bankruptcy separately.
How Much Property Do You Own?
When you file jointly, both you and your spouse's assets and property are included in the bankruptcy. This includes all of your joint property as well as any property each of you owns separately. The decision to file bankruptcy together may also depend on whether you have enough exemptions to protect all of your property. If you live in a state that allows married couples who file jointly to double exemptions, you may be able to keep more of your property when you file for bankruptcy.
If you decide to file for bankruptcy without your spouse, his or her individual property is not part of your bankruptcy. If your spouse has a significant amount of nonexempt separate property, it may be in your best interest to file without your spouse in order to protect his or her assets. This is where the assistance of an experienced bankruptcy attorney is critical.
Cost of Filing for Bankruptcy
When you file for bankruptcy, you must pay a filing fee to the court as well as pay a fee to your attorney. Although the fees are the same for both an individual and joint bankruptcy, you'll be able to save money when you file for one bankruptcy instead of two. Filing jointly with your spouse is usually more efficient and convenient if both people are looking to file for bankruptcy.
The Effect on Your Credit
If you file for bankruptcy together, it will be reflected on both of your credit reports. However, if only you file for bankruptcy, only your credit score will be affected. Even though bankruptcy does have a negative effect on your credit score initially, most people find that their credit scores tend to increase after bankruptcy. If your spouse has good credit, and you need to file for bankruptcy primarily for your own debt, it may not be in your spouse's best interest to file jointly.
The decision to file jointly or separately isn't always easy, and it ultimately comes down to what you're hoping to achieve through bankruptcy. Remember that bankruptcy should be used as a financial planning tool to help you achieve your goals. If you're not sure as to which option is better for you, it may be helpful to meet with an experienced bankruptcy attorney who can look at your situation and give you a recommendation.
