Do You Have to File Bankruptcy If Your Spouse Does?

Bankruptcy Law — Overland Park, KS — Wiesner & Frackowiak LCBankruptcy is always a complicated decision. But when you are married, it is even more complex. You must, after all, consider more than just yourself and your particular financial and material situation. You also have additional choices as a married partner. To help you find the right path to a solid financial future as a family, discover a few answers to your questions about marriage mates and bankruptcy.

Must Both Spouses File Bankruptcy?

Legally, each individual debtor is treated as a unique case. So, while you should make a bankruptcy decision as a family, you aren’t obligated to file bankruptcy just because your spouse does.

For instance, if you are a recently married couple with one spouse who entered marriage with a lot of debt, you may not yet have enough financial ties between you to put both partners at risk financially. The one struggling with debt might declare bankruptcy while the other’s good credit keeps the family moving forward.

When Should Both Spouses File Bankruptcy?

Just because married persons aren’t required to share a bankruptcy claim, they may find it’s a practical necessity. This generally happens when they share a lot of assets and debts in common. If you both use a joint credit card and one files for bankruptcy, only their obligation is discharged. The discharged portion remains a legal debt for the other person. And the lender might demand its immediate repayment.

Another complication for spouses involves assets owned in common. In Chapter 7 bankruptcy, the debtor’s assets are liquidated and the proceeds help to pay debts. If you share an asset in a non-community property state (like Kansas and Missouri), your portion of the equity (its value minus what you owe) is considered your asset. However, to access this share, the shared asset may need to be sold despite being jointly owned.

Debtors in community property states may have an even harder time due to the rules about how marital assets are divided between the partners.

How Can a Couple File Bankruptcy Together?

If you both decide that your finances are too intertwined to avoid bankruptcy as a couple, you still have two options. You each may file a separate claim for bankruptcy and have a separate case. Or you may file one case for bankruptcy and go through it as joint claimants.

Joint bankruptcy allows you to simplify the process, as you would only need to keep track of one case and make sure you follow the rules of one trustee and one chapter. It is also cheaper because you only pay one fee rather than two.

Not all couples, of course, find that joint bankruptcy is the way to go. If one person would benefit more from Chapter 7 while the other from a Chapter 13 repayment plan, they would need to file separate cases. This is more complex but could save assets (such as a house in one person’s name). In addition, qualifications for the means test in Chapter 13 may be different for joint and individual claims.

Where Should You Start?

The best way to decide how to approach bankruptcy as a couple is to work with an experienced bankruptcy lawyer in your state. They will work with you to assess your individual assets and debts as well as your joint ones to see whether or not bankruptcy is a good choice for each person. Then you can discuss whether to file together or individually.

The legal team at Wiesner & Frackowiak, LC, has assisted both Kansas and Missouri families with all their bankruptcy needs for more than 20 years. Call today to make an appointment and see how we can help you. And then, no matter what your situation, you and your partner can start planning a brighter financial future together.

Leave a Reply