There are two options for filing bankruptcy for married couples. A married couple can file an individual bankruptcy petition or a joint bankruptcy petition.
Individual Filing
An individual bankruptcy filing by one spouse does not bring the other spouse into bankruptcy. The non-filing spouse will not get the benefit of the automatic stay or the bankruptcy discharge. The effect of joint assets and joint debts will depend on State laws.
The non-filing spouse will be protected if the petition is filed under Chapter 13 as the co-debtor for joint debts but this protection will be applicable only to consumer debts and will cease once the Chapter 13 proceedings cease. Joint assets will generally form part of the bankruptcy estate and will be available to pay off the creditors. When one spouse files bankruptcy in a community property state, the marital property enjoys the protection of the filing spouse's bankruptcy discharge.
Joint Filing
United States Bankruptcy Code Section 302(a) permits married couples to file joint bankruptcy petition. Married couples should consider a joint filing when they have a lot of joint assets. In order to file a joint bankruptcy petition, you must be legally married. A joint filing is considered as a single filing and the filing fee is the same as an individual filing.
Joint vs. Individual filing
Whether married couples should file a joint petition or a single one depends on various factors:
- Type of property,
- The amount of community debt involved, and
- How the property is held (e.g., community, joint tenancy, or tenancy by the entirety).
Married couples should consider a joint bankruptcy filing if the non-insolvent spouse has few resources or is otherwise utterly financially mixed up with the other spouse. Joint bankruptcy filing can prevent harrowing situations, in which creditors attempt to reclaim one spouse's debts by going after the other spouse's assets.
Married couples should consider filing an individual bankruptcy petition if the indebted spouse has most of his or her debt in his or her name alone or when the non-indebted spouse has numerous protected assets or inheritances on the horizon.
Always Seek Competent Legal Advice
Before filing for bankruptcy, you must determine the Chapter under which you want to file. To qualify for a Chapter 7 bankruptcy, you must pass the means test.
Bankruptcy for married couple is a complex process. There are many forms to be filled. A small mistake can cost you dearly. An experienced bankruptcy attorney can guide you through the complex process and let you breather a little easier.
