Do married couples have to file for bankruptcy together?
Married couples don’t have to file bankruptcy together, but they do have the option. If you’re married and considering filing for bankruptcy, consider the implications of filing both singly and jointly before you make a decision.
Married Couples Filing Jointly
You can file jointly to wipe out all of your debt. It’s less expensive than both filing singly because filing fees are the same for a single filing and a joint filing. Attorneys frequently charge less for joint filings, than they would for two separate filings. You’ll also have joint hearings and meetings. All of your property will be subject to bankruptcy proceedings.
One Spouse Filing Singly
If only one spouse is struggling with debt, he or she might want to file singly in order to preserve the other spouse’s credit or protect some of his or her property. If you acquired property in your name prior to getting married, and your spouse files for bankruptcy, your property will not become part of the bankruptcy estate. This means that the trustee and court will not have jurisdiction over the property regardless of its value.
A recent Supreme Court decision overturned Section 3 of DOMA. That means same-sex married couples have the same options as heterosexual couples when it comes to bankruptcy. However, same-sex couples who are not legally married must file singly.
What Debts Are Discharged?
If you file jointly, all of your debts are discharged. Each spouse’s personal debts and any debts you’ve incurred jointly are wiped out. If both of you are struggling with debt, filing jointly can be an efficient way to start afresh. The bankruptcy will show on both spouses’ credit reports and both spouses’ credit scores will take a hit.
When only one spouse files for bankruptcy, only one spouse gets a discharge. The non-filing spouse still has to pay all personal debts and any joint debts. So, if you file singly, your spouse is still on the hook for any joint debt you’ve incurred. If you’re in default on your joint debts, creditors can come after your spouse for payment. In a common law property state, any jointly owned property that isn’t liquidated through bankruptcy may still be vulnerable to repossession by creditors because they have a claim against the non-filing spouse. In a community property state, claims against community property are also discharged entirely, so repossession and foreclosure are no longer options. However, creditors may (and will) still pursue the non-filing spouse for payment through law suits and collection agencies. If you have joint debt, the non-filing spouse’s credit score may also be affected.
What Should I Do?
The rules regarding property rights, exemptions, and joint debts are complex and vary by state. If you’re considering either single or joint bankruptcy, gather your financial information and talk to an experienced bankruptcy attorney. Your attorney will be able to help you determine which option is best for your needs and your circumstances.