Does My Spouse Have To File Bankruptcy With Me?
No, your spouse does not have to file bankruptcy with you. Whether you file individually or together will be a function of your income, assets, and debts. Our office will assist you with the decision-making process and weighing the pros and cons of a joint bankruptcy filing or an individual bankruptcy filing.
While it may make sense for both spouses to file bankruptcy, a qualified Charlotte bankruptcy lawyer will walk you through the options that suit your particular situation best. Typically, married couples hold debt in many different ways, so it makes sense to analyze the specifics of your situation before making a choice. Filing jointly may provide more debt relief, but there are other concerns to consider.
Let’s Talk Debts
If you and your spouse have separate debts, you may consider filing individually. When you file without your spouse, your debt is discharged, and your spouse’s debt survives the bankruptcy. If you have joint debt and one spouse files, the debt as to the filing spouse is discharged. However, it is important to note the non-filing spouse will still owe the entire balance on the debt. For this reason, many married couples choose to file a joint bankruptcy.
My Spouse’s Credit
One reason to file individually is to preserve the credit of one spouse. In cases where spouses do not hold debt jointly, this is typically a clear option. The filing spouse receives a discharge for the debt in his name, and the non-filing spouse retains her good credit, along with her debts.
North Carolina is not a Community Property state, so even where a married couple holds joint debt, if the non-filing spouse keeps payments current on her debt, her credit score will not be affected.
Does Income Matter?
Income plays a role in whether you have the option to file a joint Chapter 7, and income plays a role in the calculation of your monthly payment in a Chapter 13 bankruptcy filing. When both spouses file, all household income is included in the monthly budget. This affects your Means Test in Chapter 7, and your disposable income in Chapter 13. It is worth noting that all household expenses are also included in those calculations. The goal is to give the court an accurate picture of the household’s financial situation.
When considering whether one spouse should or should not file, income may play a strategic role. Even if one spouse is not filing, both spousal incomes must be included in the income column of the bankruptcy filing. However, any income the non-filing spouse spends on herself (i.e., does not contribute to the ‘household expenses’) can be deducted from this total. For example, if one spouse makes $7,000.00 per month, but gives $1,000.00 a month to help her parents, and contributes another $700.00 per month to a 401k plan, those items are subtracted out from the income totals. Once our office runs hypothetical calculations under both scenarios, the difference often helps dictate the filing strategy.
Ownership Of Assets
The rules of bankruptcy are unique. They do not always make sense, but they are generally predictable. Our firm is familiar with the court’s treatment of asset ownership in both Chapter 7 and Chapter 13. We will ask you who currently owns each family asset and whether those assets have been transferred recently. Quite often, we drive a vehicle believing it to be “our” vehicle, even though it may be titled in our spouse’s name. The same may be true of a home owned by a married couple. Determining who is on the deed to the property is of utmost importance in applying the bankruptcy asset rules to your case.
Many assets in a household are not titled. Generally, ownership of household assets is assumed to be owned 50/50 between spouses. However, if a large item was given as a gift, we may be able to categorize that item as yours or your spouse’s, depending upon the specifics.
Collections Attempts
In a Chapter 13 filing, the automatic stay is effective for the co-debtor on consumer debt. This means that if one spouse files and another does not, and they hold joint debt, even if they are not paying on that joint debt, creditors cannot pursue collections against either spouse. So the calls stop, and you get to preserve your credit at the same time. Not only that, but for joint debt, creditors cannot repossess property or foreclose on your spouse just because she didn’t file.
This automatic stay remains in effect until the bankruptcy is over. However, once the bankruptcy concludes, the creditor can resume attempts to collect against the non-filing spouse for those joint debts. At that time, the hope is that you’re able to make payments on that debt because of the relief the bankruptcy provides.
A Backup Plan
Another reason to have one spouse file is to provide a backup plan if you get into a spot where you cannot make your Chapter 13 payments. If the first filing is dismissed for non-payment, the non-filing spouse could consider filing a new Chapter 13 to get relief from creditors.
Do not Worry, Call A Lawyer
The good news is your bankruptcy lawyer addresses all of these potential hurdles for you, and in doing so provides for a smooth bankruptcy filing. Call us to speak with a lawyer today. We can be reached at 704.749.7747 or you can simply click HERE to request a call. For further reading, this ABI article on non-filing spouses may be helpful.