When you got married you agreed that the two of you were in this for better or worse, and there are not too many things that can negatively affect a marriage as quickly as money issues. Can these issues be resolved by filing bankruptcy? Is this something that the two of you should do together, or if only one of you is carrying the majority of the debt, should they do this alone? Many times the answer simply boils down to what type of debt you have and who is holding the debt. Understanding this, as well as your filing options, are the first steps to help you make your decision on which way to go.
As A Married Couple, You Have Filing Options
While many married couples have various views when it comes to how they handle their finances, debt normally comes down to two options. One spouse or the other incurs the debt individually in their name, or you incur the debt jointly as a couple and the debt is in both names.
When you choose to file bankruptcy and you are married, you will have the option of filing one of two ways. These filing choices are:
- A Single Petition - This is a petition that is filed by you or your spouse. While financial records and other documentation that must be submitted may have both of your names it on, the court will only look at the one person that is filing.
- A Joint Petition - This is when the two of you file a single set of bankruptcy papers that will address all of the assets and debt that is a part of the marriage.
Four Times A Single Petition May Benefit You
As a couple, you may be better off if one of you files a single petition, especially if the following applies:
One of you brought a lot of debt into the marriage, or only one of you has accumulated a lot of debt alone since you have been married - No matter if this debt is incurred due to poor spending habits, or a failed business, if the majority of the debt belongs to one person versus the other, it may make more financial sense for that person to file an individual or single petition. Unfortunately, if only one person files and there are any joint debts between the two of you, the other person will become singularly responsible for that debt.
One of you has a significant amount of individual property that you may not be able to exempt and keep away from creditors - The federal bankruptcy system, as well as your individual state, has rules in place as to how much property you are allowed to exempt as a part of your bankruptcy proceedings if you file Chapter 7 bankruptcy. Any other property is reviewed and considered as an asset that could potentially be sold in order to pay off your debt.
As long as the person that owns the property does not file, this property may be protected from being able to be counted in your assets or sold to pay off the debt. Unfortunately, this will not help you if you live in a community property state where all property is considered to belong to both of you no matter whose name it is in.
One spouse has previously filed bankruptcy and had their debts discharged under the plan - The bankruptcy law places restrictions on how often you can go through the bankruptcy process. Depending on the type of bankruptcy that was previously filed, the spouse that previously filed may not be eligible to do it again for four to eight years, although there are sometimes exceptions to these rules.
One of you has significant priority debt, or non-dischargable debt - This type of debt would include the following:
- Tax obligations
- Federal student loans
- Accident judgements
- Restitution and criminal fines
- Certain taxes, as well as a few others
Because these obligations cannot be reduced or discharged in bankruptcy, it is often in your best interest to pay them outside of the plan. Even if they are included in your plan, you will still be responsible for the balance due on them once your plan is concluded. If your spouse has only or mostly this type of debt, it may not be worth it to include them in a joint filing.
There are other things that you may want to consider in addition to the type of debt you are carrying. A bankruptcy attorney can help you to review these and decide whether to file a single petition or file jointly. Call and make an appointment today to see if filing bankruptcy would help to eliminate some of the debt that may be taking a toll on your marriage. You can also visit sites like http://www.wflaw.net to learn more.