Can I File For Bankruptcy Separately From My Spouse?

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Married individuals have the option of either filing a bankruptcy case together or filing an individual case. So what option is best?  There are times when it makes more sense to file together with your spouse, or to file separately.  However, the waters get murkier if you are in the process of a separation.

Can I Possibly Be Tied To My Ex-Spouse’s Bankruptcy?

Spouses can be indirectly connected when just one spouse files for bankruptcy. Even when one spouse files for bankruptcy, both spouses’ income has to be disclosed in the bankruptcy financial forms. The means test and other financial disclosures in bankruptcy are based on household income and not just the filer’s income. The second connection between a filing spouse and a non-filing spouse is that if both spouses are responsible for a given debt, then just because one spouse has filed for bankruptcy does not excuse the non-filing spouse from the obligation. However, in spite of these connections, the non-filing spouse should not be impacted on their credit report or their individual obligations.

Are There Benefits To Filing For Divorce Before Filing For Bankruptcy And Vice Versa?

There is significant interplay between divorce and bankruptcy, because spouses usually have a joint obligation on a number of debts. It will be an individual analysis, based on the particular circumstances of the person considering filing. Some debts that arise from separation, such as alimony and child support, are non-dischargeable. However, other debts, such as equitable distribution, can be dischargeable in some circumstances. It is encouraged to consult with both divorce counsel and bankruptcy counsel to evaluate the individual circumstances, in terms of bankruptcy timing.

What Happens If Someone Files For A Bankruptcy In The Middle Of A Divorce?

In most instances, divorce actions are not subject to the automatic stay which often comes out of bankruptcy filings. However, there can be situations where the automatic stay may impact the proceedings in a divorce. Depending on the circumstances, the bankruptcy could temporarily forestall progress in the divorce action.

What Can I Do To Protect Myself If My Spouse Files For Bankruptcy?

If a spouse files for bankruptcy, the non-filing spouse should consult with bankruptcy counsel to see if there will be any impact on them. While often there may not be any impact at all, in some circumstances, a filing spouse’s bankruptcy may prohibit a non-filer from proceeding with collection activity or undertaking other actions on the way to separation. There also may be impact if the non-filing spouse remains obligated on loans that the filing spouse has discharged. It is important to be mindful that even if an order in the divorce action requires one spouse to make the payments on a particular set of debts, the divorce order does not change the contractual obligations between the lender and the borrower. Even if one spouse is ordered to make all the payments in a given set of debts, the creditor could sue the other spouse if they were signed as the borrower on the loan or credit card.

I Have A Lot Of Debt. Should I File For Bankruptcy Now Or Wait Until I Get Married?

Many clients find it desirable to start a new marriage with a clean bill of health from their debt. Marriage does not, by itself, create co-liability on existing loans, but it may make for more cohesive financial arrangements if both partners are entering into a marital relationship with balance on their debt obligations.

When should you file bankruptcy with Your Spouse?

It may be a good idea for spouses to file together if you both have problem debts.  When you file together, you can go through the process together in a way that is mutually supportive, and eliminate your debts at the same time.  Most law firms add little or no added attorney fees for filing a joint case, so it’s almost like going to the grocery store for a “BOGO.”

Likewise, even if only one spouse has the majority of the debt trouble, but the other spouse is jointly on some of the debt, it may still be a good idea to file jointly.  One spouse eliminating their debt in bankruptcy does not eliminate the debt from other people who are obligated on the loans, so filing a bankruptcy together will allow you to tie up loose ends.

When Should I file bankruptcy without my Spouse?

In contrast, you might want to have only one spouse file for bankruptcy if the debts are clearly separated out and only one spouse has the majority of the debt.  Having only one spouse file can provide a strategic benefit for a bankruptcy case.  It can allow the non-filing spouse to preserve their credit, so that the couple can still get access to lending if needed.

Also, in some instances, when only one spouse files for bankruptcy, the filer is effectively allowed more exempt property (in other words, there is less chance they would have to give up some of their stuff in order to clear their debt).

Conclusion

There can be strategic benefits to filing with and without your spouse.  Both options are available and the right choice can help in the journey to a fresh start.

Call today to explore the strategic considerations for you to get in control of your debt.

 

For more information on Bankruptcy & Marital Issues In Florida, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (727) 538-4188 today.