Saturday, August 20, 2016

Filing for Bankruptcy Independently of Your Spouse

Can one spouse file for bankruptcy without the other?

It is certainly possible to file for bankruptcy as an individual even if you are legally married, but there are a number of things you should know about the procedure. As part of your bankruptcy proceedings, you will be required to attend 341(a) meeting(s) with the creditors to whom you owe money. The afore-mentioned meetings are designed to give your creditors the ability to examine you under oath about your financial affairs.

Although your non-filing spouse need not accompany you nor answer any questions since he or she is not the individual filing for bankruptcy relief, your spouse may accompany you in order to be supportive and in order to observe the examination you undergo. Remember, though, that he or she will not usually be allowed to approach the trustee's desk or answer any questions on your behalf.

Can your spouse be asked to present documents even though he or she is not filing for bankruptcy?

Yes. Even though you are filing for bankruptcy alone, your spouse's income and any jointly owned assets must be disclosed during your bankruptcy hearing. If you reside in a community property state, such as California or Texas, you will have to disclose all of your spouse's assets as well as your own. You should therefore be prepared to present documentation of your spouse's income, such as recent paystubs, and to answer questions regarding your spouse's financial affairs. A competent bankruptcy attorney will be able to advise you on precisely what will take place at a 341(a) meeting.

Should you file for individual or joint bankruptcy if both you and your spouse intend to file?

There are pros and cons to filing jointly for bankruptcy. The pros include:

  • Lower bankruptcy costs if you will both be filing
  • Elimination of all dischargeable debts, rather than just your personal ones
  • Efficiency of gathering documents only once and attending all hearings together

On the other hand, the cons of filing bankruptcy jointly can also be compelling. They include:

  • If one spouse owns too much property then you may not be able to exempt all of combined assets in a joint bankruptcy whereas if one spouse files bankruptcy alone, the non-filing spouse's assets will not be part of the individual bankruptcy proceedings.
  • At the other end of the spectrum, if one spouse has heavy debt, such as tax debt or domestic support obligations, all of that would have to be paid in full before filing Chapter 13. Here again, filing separately would probably be the wiser choice.

If you are uncertain whether it is in your best interests to file independently or jointly with your spouse, you should consult with a qualified bankruptcy attorney who will help to clarify your options.

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