In bankruptcy cases, marital disposition is a determining factor regarding how marital debt is apportioned. A married debtor can file jointly with a spouse or choose to file alone. However, legal separations and annulments may complicate issues of marital debt.
Legal Separation
If a debtor is legally separated from his or her spouse - also referred to as "married but living separately" - the debtor has to decide whether to file jointly or separately. If the spouses decide to file jointly, all marital debt will be resolved upon judgment. However, if one spouse files separately, the petitioner must provide information on the joint marital debt as well as the petitioner's personal debt. The court may then only consider the petitioner's portion of the marital debt.
To file separately, the petitioner must do the following:
- Fill out a voluntary petition. Under "Name of Joint Debtor" write "Non-Applicable." The petitioner must omit the spouse's name as a joint debtor in all of the documents. Property separately owned by the non-petitioning spouse should not be listed.
- Itemize debts and assets. The debt itemization should include debt that both he and his spouse are responsible for while the asset itemization should include his property as well as any property jointly owned. Additional information that should be collected include pay stubs and tax returns for the prior five years, even if before the marriage.
- If the state is a community property state, any property acquired before the marriage is considered separate while property acquired during the marriage (such as the home mortgage) is considered joint property.
- Assign each debt to the respective spouse. Assets such as separate credit cards are easily assignable, as are car notes for respective cars.
- Include a credit counseling certificate (a pre-requisite) that shows how the debt will be alleviated.
Once the petition is filed, the court issues an automatic stay which prevents creditors from pursuing their interest in the petitioner's assets.
Annulment
A marriage annulment is a legal determination by a court that a marriage never existed. Annulments are granted in cases where the parties were not legally married because of a legal incapacity, such as incest, one of the spouses was underage, or bigamy. A marriage may also be voidable in cases where one party perpetrated a fraud to facilitate the marriage, where one spouse refuses to consummate the marriage or where there was "want of understanding" because one or both parties were incapacitated due to alcohol or drugs.
The court treats an annulment differently from a divorce or other marital dissolution. In this case, the courts seek to leave the parties the way they were prior to the illegal marriage. Because the marriage was not legal, there are no legal or financial obligations on either party to the other. Entanglements such as spousal support or marital debt are not issues. Therefore, if any debts or assets were obtained following the "marriage," both parties have to decide which portion belongs to each before filing for bankruptcy.
Find an Attorney
If you are in a legal separation, you may opt to file a bankruptcy jointly or separately. One may be easier to do than the other depending on the circumstances. Consult with a bankruptcy attorney to determine which is the best course to choose.
