If you are considering filing for bankruptcy and are married, you may be wondering if your spouse needs to file with you. The short answer is no, however there are several factors that need to be considered when making this decision.
Circumstances that make it wise to file for bankruptcy alone include: if you keep your finances completely separate (and have proof of this), debts are in one spouse’s name alone, and if your spouse previously filed for bankruptcy and is not eligible for a discharge at this time.
A Chapter 7 filing is commonly thought of as a “liquidation” filing. this means that most of your debts are wiped clean once you receive a discharge. Eligibility for a Chapter 7 filing requires a person to pass the means test which is based on household income from six months before filing the petition. If the couple shares the same house, your spouse’s income must be included in the means test, even if you file on your own. Expenses that do not benefit the household can be subtracted from the spouse’s contribution to the household income, such as alimony or child support paid to an ex-spouse.
Once a Chapter 7 is filed, an automatic stay is entered. You can think of this as a protective shield that the court puts in place for you which stops any garnishments, debt collection lawsuits, and foreclosure proceedings. However, if only one spouse files the automatic stay only applies to the person that filed bankruptcy and any joint debts the other spouse will still be responsible for. Additionally, if only one spouse filed for bankruptcy, the discharge will only apply to that person for any joint debts that exist. Meaning that the non-filing spouse will still have to pay on those joint debts.
A Chapter 13 filing is known as the “repayment plan”. A filing under this section of the bankruptcy code requires the debtor to make payments to the bankruptcy court, which then disperses them to creditors to repay portions of the debt owed. A Chapter 13 does include what is called a co-debtor stay. This protects your spouse as part of the automatic stay. It prevents creditors from pursuing debt for the non-filing spouse for the duration of the bankruptcy. It is important to note that the co-debtor stay does not release the non-filing spouse from their obligations for any joint debts. The co-signer for any debt remains responsible for paying it. As long as the non-filing spouse meets those obligations, their credit score will not be affected by the bankruptcy filing.
What if you and your spouse are separated? Do you need to include their income in that situation? The answer is no. You do not need to include your spouse’s income in the bankruptcy filing if you maintain separate households.
If you are married and considering filing for bankruptcy on your own, it is important to consult with an experienced bankruptcy attorney to make sure it is a wise decision for you to make and that you still meet the requirements set forth by the bankruptcy court. Call our office to schedule a consultation with one of our experienced bankruptcy attorneys. (723) 422-2377.