Not only can you file for bankruptcy when you’re married, but you'll get to choose how to do so. You can decide whether:
Depending on your situation, one approach will likely be more beneficial than the other. In this article, you’ll learn some of the pros and cons of a bankruptcy filing when married.
Here are a few reasons to file with your spouse:
Here’s why it might make sense for one spouse to file alone:
You’ll find more information in Filing for Bankruptcy as a Couple or Individual.
Many people want to know whether they can get around qualification problems by filing alone and declaring only their income. The answer is no. You can’t solve a qualification problem that way.
The issue comes up frequently when a couple makes too much money to qualify for a Chapter 7 bankruptcy debt discharge (the type that erases debt in a matter of months). Bankruptcy law requires both spouses’ income for:
Even when one spouse files, you won’t be able to prepare the bankruptcy case without the cooperation of the non-filing spouse. You’ll need the non-filing spouse’s:
You’ll be able to deduct some of your spouse’s expenses, like a student loan or support payment, which could lessen the impact of the spouse’s income.
Depending on your situation, additional financial information might be required. A non-filing spouse with significant assets should consult with a bankruptcy attorney to determine whether any assets are at risk.
Instead of dividing up debt in a divorce proceeding, discharging it in bankruptcy before your divorce is final can be more efficient. After your bankruptcy, you’ll have far fewer issues to resolve in the divorce proceeding.
For instance, if you qualify for a Chapter 7 discharge, you can erase debt like:
By contrast, filing for bankruptcy after a divorce proceeding can be tricky without proper planning. The bankruptcy won’t wipe out your ex-spouse’s debt. So, if the marital settlement agreement or divorce decree requires you to pay off debt that’s in your ex’s name, you’ll likely remain responsible for paying it after the divorce.
One way around this problem is to be sure that you’re on the hook for debt in your name alone. Careful planning will increase the odds of emerging from a post-divorce bankruptcy debt free.
Filing for bankruptcy before or after a divorce is often complicated—and it’s made more so by the particular laws in your state. If you’re considering filing before a divorce, while separated, or shortly after a divorce, it’s prudent to consult with an attorney familiar with both family law and bankruptcy issues.
