Does my Spouse Have to File Bankruptcy with Me?


A very common question in bankruptcy planning is whether your spouse has to file bankruptcy with you.  And here is the good news – you have the option of filing by yourself or you can file with your spouse.  So what option is best?  There are times when it makes more sense to file together with your spouse, or to file separately.  But the waters get murkier if you are in the process of a separation.

 

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 time same.  Most law firms add little or no added attorney fees for filing a joint case, so its 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).

Should I file with my spouse if we are in the process of a divorce?

A common and difficult question is whether a couple should file for bankruptcy if they are in the process of separating.   It may be a huge help in the separation process for the couple to clear out their joint debt in the transition to allowing them to go on with their individual lives.  As you might imagine, the answer to this question is situational.  Sometimes filing for bankruptcy together is a good idea.  But other times, even if bankruptcy is a good option for the separating couple, filing bankruptcy together isn’t right.

Some considerations we look to are:

  • Are there any conflicts of interest within a potential bankruptcy if they were to file together?
  • Would it be a short term bankruptcy (chapter 7) or a long term bankruptcy (Chapter 13)?
  • What is the extent of the joint debt.

Conclusion

There can be strategic benefits to filing with and without a 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.

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