Bankruptcy is a last resort for the overwhelming majority of people. If you are forced by circumstance to have to file, you almost certainly have a thousand questions about the future, and that load doubles if you are married. Many couples file for bankruptcy jointly, but this is not always the best choice, and either way, it is important to be aware of the potential effects on both your and your spouse’s financial future whether or not you choose to file jointly.
Should We File Together?
In some situations, it can actually be advantageous to file for bankruptcy as a couple, most often if your financial situations are comparable. If both of you are heavily in debt, it may simply save time and money to file together, or if the majority of your debt is joint (that is, held by both of you), a joint filing may also be a good idea.
By that point, bankruptcy will not hurt your credit any more than continuing to be delinquent on debts will. A spouse does not have to join in your bankruptcy filing, though it is a common misconception that he or she does. There are risks when only one spouse files, for example jointly held assets, such as the non-filing spouse being responsible for jointly incurred debts.
However, there may be good reasons to file together. If you are thinking of divorce, a joint bankruptcy is a good way to clean up debts, so that you are not arguing over payment of debts neither party can afford.
The only time that a spouse may wind up on the proverbial hook for a debt she did not incur is if she cosigned on a loan or otherwise associated her name with the expenditure as an authorized user. If your spouse cosigned on a personal loan you took out, and you file for Chapter 7 bankruptcy, your spouse may be held liable for the entire cost of the debt (since a Chapter 7 filing effectively makes the filer immune to creditors’ requests, so the only person remaining on the hook is the spouse).
A Spouse’s Income Still Matters
Even if your spouse does not file jointly for bankruptcy with you, his income and financial information can still be very important and play a significant role in your filing, especially when determining which chapter of the U.S. Bankruptcy Code you are allowed to file under.
Individuals tend to file either a Chapter 7 or Chapter 13 Bankruptcy, with the major difference between them being that a Chapter 7 filing will wipe the slate clean with a limitation on the amount of assets you may retain, while a Chapter 13 filing offers a repayment plan (usually partial) of some of your debts, to be completed over many months.
If your debts are mostly consumer debt (not business debt or personal income taxes) there is an income limit over which an individual may not file in Chapter 7 – that is, if your income is more than a certain amount, you may not file for Chapter 7, and must file instead under Chapter 13.
If you are considering filing for Bankruptcy, your spouse’s income is included in calculating your bankruptcy eligibility even if you file separately. If your household total is below the Florida median income, you are exempt from the test. However, if the total of your income and your spouse’s income vis-a-vis your debts is higher, you may not qualify for Chapter 7, but ordinarily leave a good opportunity to file Chapter 13.
Contact An Experienced Legal Professional
If you are deliberating about whether or not to file for bankruptcy, you may want to consult a knowledgeable lawyer before making a decision. The Orlando bankruptcy lawyers at the firm of Goodblatt · Leo understand that you and your spouse must weigh the options before moving forward, and we are happy to answer questions to help you do that. Contact us today to set up an appointment. We understand how complex this area of law is and want to offer you options tailor-made to your situation.
Our attorneys, Amy E. Goodblatt and Tatiana Leo, have more than 55 years of combined legal experience. They are directly involved in each case and stay focused on the issues that matter most to you.
