Should You File for Bankruptcy Jointly or Individually?

A debtor can file for bankruptcy individually. When one spouse files for bankruptcy, only the filing spouse will receive the full protection of the automatic stay and the discharge since the non-filing spouse is not a part of the bankruptcy case. Whether it is best for one spouse to file will depend on several factors, including whether you live in a community property state, the debtor’s source of income, and the nature of the debts. (See also Conflicts In Joint Bankruptcy Filing).

Joint Debts

The filing spouse can have their separate debts and joint debts discharged in bankruptcy. However, the non-filing spouse is still liable for joint debt. The creditor can try to collect the debt from the non-filing spouse if the filing spouse does not file under Chapter 13. The non-filing spouse will receive the protection of the automatic stay if the creditor will receive payment in full of the debt in the Chapter 13 plan.

Separate Debts

In a community property state, creditors, such as credit card companies, may go after the non-filing spouse for the debt even if their name was not on the credit card agreement. The credit card company may sue the non-filing spouse to collect the debt. However, after the bankruptcy discharge, the creditor with a judgment cannot collect the debt out of the community property assets. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

In non-community property states, credit card companies should not be able to sue the non-filing spouse for the filing spouse’s separate credit card debt if the non-filing spouse did not sign the credit card application.

Community Property States

In community property states, even if one spouse files for bankruptcy, all of the property of the community becomes a part of the bankruptcy estate. The trustee can use the property to pay the creditors of the filing spouse if the property is not exempt.

The filing and the non-filing spouse will benefit from the bankruptcy discharge. Community property acquired by the filing and the non-filing spouse after the bankruptcy is protected from creditor claims against the non-filing spouse for pre-bankruptcy debt. The creditor, therefore, can only collect on a claim from the separate property of the non-filing spouse. This protection lasts for as long as the couple remains married.

Always Get Qualified Legal Advice

If you decide to file for bankruptcy without your spouse, it is best to consult with a bankruptcy attorney. An attorney can advise you on whether it is appropriate in your situation to file separately or jointly for bankruptcy.