When you’re married, you usually try to work through everything together as a team. Part of that teamwork includes making wise decisions about finances so that you can have a successful future together. Sometimes one partner brings debt to a marriage that the other partner may or may not be responsible for. Some couples decide to combine all their money, while others prefer to keep expenses separate and each handle their own budget and bills. Regardless of how intertwined or separate your finances are, sometimes the strain of debt can lead to bankruptcy. Couples are then faced with the decision to file together or to just have one partner file as an individual.
When filing bankruptcy, most people do whatever they can to discharge the most debt and keep the most property possible. These goals as well as each couple’s specific circumstances can determine if it’s best to file jointly as a married couple or for one person to file separately as one individual. Additionally, knowing if your state of residence is a community property state will affect your choices.
Filing Separately
If you’re married, you may decide to file as an individual if you have debt in your name, but do not have much debt or property in both your names. Filing in this way would include debt that is only in your name, but your spouse would still be responsible for any debt that is in both your names. As well, any property that you own as an individual will be included in the bankruptcy, but jointly owned property would be excluded. One of the benefits of this choice is that the partner who does not file may choose to file at a later date and include joint debt and property. Also, only the filing partner’s credit score is affected. When determining eligibility for a Chapter 7 using the Means Test and when calculating the repayment plan for a Chapter 13, both partners’ income is counted, even if only one person is filing bankruptcy. However, using the marital adjustment deduction could allow you to deduct some of your spouse’s income that he or she uses to cover their own expenses (such as student loans, credit cards, and retirement investments) to lower your disposable income.
Filing Together
If you and your spouse have combined your finances and most of your debts and property are in both your names, it may be best to file jointly. Filing bankruptcy in this way will include all your joint and individual debt and property. Both of your credit scores will be affected, but there are things you can do to rebuild your credit and improve your credit score fairly quickly. Filing jointly is usually the simplest choice for married couples, and it also saves on attorney and filing fees. The fees are the same regardless of how many people are filing, so if you think your spouse may need to file later, you’ll be paying double for the same result. Filing together also saves you the time of completing paperwork, gathering documents, taking your credit counseling classes, and attending the 341 meeting.
Here to Guide You
If you’re having financial troubles and it’s causing discord in your marriage, you may need some help deciding what to do. I’d be glad to meet with you, learn more about your situation, and offer my professional advice. Call today to get started.