If you are married and contemplating filing for bankruptcy, you may be wondering whether to file alone or jointly with your spouse. Below are a few issues to consider in making this decision.
Reasons to File Jointly
Filing for bankruptcy jointly has two primary advantages. One is that filing jointly helps married couples handle joint debts, including taxes and loans for which both spouses co-signed. If only one spouse files, the other spouse will remain liable for the debt and must continue making payments. It is often in the best interests of both spouses to file jointly in order to prevent a creditor from going after the second spouse once a debt is discharged with respect to the first. Therefore, joint filing can be advantageous when couples have large amounts of joint debt and neither spouse is capable of handling repayment alone. Joint filing also tends to make more sense when the assets belonging to the debtor spouse are closely intertwined with those of the non-filing spouse.
Reasons Not to File Jointly
While joint filing makes sense in many cases, it is not always the best course of action. For example, in Chapter 13 bankruptcies, a joint filing will not be necessary to provide at least some protection to the non-filing spouse. Typically, only the individual who files for bankruptcy is protected from debt-collectors. However, in a Chapter 13 case, the non-filing spouse is often protected from creditors during the pendency of the case by a “co-debtor stay.” The co-debtor stay will protect your spouse, at least for a period of time, if you decide to file for Chapter 13 relief alone.
Joint filing may also be unnecessary to protect the non-filing spouse’s assets when the spouse contemplating bankruptcy has most of the debts in his or her name alone, or where each spouse maintains separate assets. If the spouse contemplating bankruptcy has most of the debts in his or her name alone, or if each spouse maintains separate assets, creditors generally are unable to go after the non-filing spouse for recovery.
Impact on Non-Filing Spouse
While joint filing may not make sense in some cases, it is important to realize that filing for bankruptcy may still adversely affect your spouse even if you decide to file alone. For example, even if you file alone, joint property may still be included in the bankruptcy estate and thus made available to repay creditors. Your bankruptcy, moreover, could negatively affect your spouse’s credit worthiness in the future if you jointly apply for any loans.
Talk to a Lawyer
Whether to file alone or jointly with your spouse is a decision not to be taken lightly and should be made with the advice of experience bankruptcy counsel. The advantages and disadvantages of joint filing will vary with each case. Contact an experienced bankruptcy attorney to determine which option is right for you.
About the Author:
Brandon Moreno is a founder of the Utah Bankruptcy Hotline, which connects Utah consumers that are suffering from financial difficulty with experienced Utah bankruptcy lawyers.