Anyone can file for bankruptcy with or without their spouse, but deciding whether or not they should ultimately depends on the kind of debt involved and who’s responsible for it.
Filing for bankruptcy without your spouse can be a tricky process depending on the state you live in. Before deciding to file, it is important to understand that any assets held jointly with your spouse will still be included in the bankruptcy filing and may affect their credit rating as well.
In some states, such as California, married couples are allowed to file for bankruptcy together, even if one of them does not wish to do so. In such cases, the filing spouse is responsible for debts that are solely in their name and any joint debt will be assumed by both spouses.
That last bit touches on why it may make more sense to file with our without your spouse, so let’s dig into that a little deeper.
When Filing for Joint Bankruptcy Can Make Sense
Generally, you might wish to consider a joint bankruptcy with your spouse if you’ve accrued a lot of unmanageable debt since your wedding day. In most cases, it doesn’t matter who was responsible for running up debt: Spouses are equally responsible for debt they or their partner create during the marriage.
A joint bankruptcy can make a lot of sense in this situation because both you and your spouse need debt relief. You may also consider filing for joint bankruptcy when you and your spouse both have a lot of separate, which is debt accrued before getting married. It’s not always easy to achieve, but you can discharge both marital debt and separate debt during joint bankruptcy.
Not only that, but you can also increase the exemptions you can claim during Chapter 7 bankruptcy, which may be able to protect all or a significant amount of your property. An exemption increase is an important factor to consider because your community property becomes part of your bankruptcy estate whether you file with or without your spouse. Being able to exclude as much of it as possible protects it from liquidation.
When Filing for Individual Bankruptcy Can Make Sense
Filing for bankruptcy without your spouse can make sense when the exemptions you can claim cover your community property, your spouse has sizeable separate assets, and you have a lot of separate debt.
If you brought unpaid medical bills, credit card balances, and other kinds of consumer debt into your marriage, filing for individual bankruptcy can help you clear these debts and minimize the impact on your spouse. You can wipe away this debt, but keep in mind that any separate debt your spouse may have will persist.
Your separate assets and community property may be at risk, but creditors generally can’t claim your spouse’s separate assets. You will likely need to disclose these assets and prove that they belong to your spouse alone, but it’s possible to overcome this hurdle with help from an experienced bankruptcy lawyer.
Also, filing for bankruptcy alone can protect your spouse’s good credit score, potentially allowing you both access to credit you may need in the future.
Contact Us for Legal Guidance
Deciding to file for bankruptcy is a major decision and one that you should make after getting reliable legal counsel. At Nguyen Law Group, our experienced bankruptcy attorney can be the guide you need during this process, helping you understand your options and the impacts your decisions can have.
If you are concerned about how bankruptcy can affect your spouse, we understand. That’s why we invite you to claim a free initial consultation with us to learn more about our legal situation and how we can help.
For more information about claiming your consultation, contact Nguyen Law Group online now.