Married couples who are considering filing bankruptcy have a choice of filing jointly, or one of the partners can file independently.
Filing jointly combines both spouses’ property and debts into the same case. Although filing a joint bankruptcy is often the right option for many couples, sometimes it is not. In the end, the decision will be based on which choice permits you to discharge maximum debt and keep as much property as possible.
Identify Which Debts You Want Discharged
Being free from debt is one of the primary reasons for filing bankruptcy. When filing a joint bankruptcy, couples can wipe out all of the dischargeable debts owed by both parties.
One scenario in which a spouse may file singly is if they came into the union with significant outstanding bills and wish to keep the debt-free spouse out of the proceedings. This will likely permit the non-filing spouse to protect their credit rating against a ten year mark on their report.
If only one spouse files for bankruptcy, the non-filing partner will typically still owe his or her own debts as well as any joint debts. Therefore, when couples share the same debts and obligations, filing a joint bankruptcy is generally the better course of action. However, if there are few or no joint obligations, and the spouse has many individual debts, the better option might be to have only the in-debt partner file.
Property Ownership
When couples file for bankruptcy together, both spouse’s assets and property will be included – both community and separate property. The decision to file a joint bankruptcy will depend significantly on whether you have enough exemptions to protect all of your property. In many cases, Florida allows married couples filing jointly to double the exemptions, keeping more of your property.
Bankruptcy Expenses and Convenience
Filing for bankruptcy typically involves paying a filing fee to the court and paying an attorney to navigate you through the bankruptcy proceeding. By filing a joint bankruptcy (rather than two individual bankruptcies), there may be substantial cost savings, as the court filing fees are the same for both individual and joint bankruptcies. A single legal case is also typically less expensive than two cases.
When making a bankruptcy claim, the filer must provide large amounts of financial information to the court and the bankruptcy trustee. You must also attend a hearing in front of the trustee. In the case of joint bankruptcy, only one set of documentation and one meeting is necessary. Therefore, filing jointly is typically more efficient than arranging two separate filings.
Will it Affect Your Credit?
If you file a joint bankruptcy, both of your credit reports will be impacted. Therefore, if you have good credit and your spouse has the majority of debt, it may be more prudent to file on a single basis.
Bankruptcy has a negative effect on your credit for up to 10 years, although most credit scores will begin to increase shortly after resolving the case. Still, couples may wish to have one person in the household who is not impacted by the bankruptcy.
Clearly, there are many nuances to filing bankruptcy if you are a married couple. Call Sarasota and Bradenton bankruptcy attorney Richard V. Ellis for more information and to discuss the options you and your family may have to provide debt relief.
