Can I File for Bankruptcy If I’m Married?

Understanding Individual and Joint Bankruptcy Filings

When considering bankruptcy, married individuals face a choice between filing individually or jointly with their spouse. An individual bankruptcy filing means only one spouse seeks debt relief. In this scenario, only debts solely in that individual’s name, or their share of joint debts, are discharged, and only that individual’s credit report is directly impacted. The non-filing spouse’s credit standing remains unaffected by the filing itself.

Conversely, a joint bankruptcy filing involves both spouses petitioning the court for debt discharge together. This approach discharges both spouses’ eligible debts, including most joint obligations. A joint filing affects both spouses’ credit histories, as the bankruptcy will appear on both reports.

Opting for a joint filing often presents administrative efficiencies. A married couple can file a single bankruptcy petition, incurring one set of court filing fees rather than two separate fees. This consolidates the legal process into a single case, which can simplify the procedure. The choice between individual and joint filing depends on the nature of the debts, asset ownership, and the financial goals of the couple.

How Marital Status Affects Your Bankruptcy Case

Marital status significantly influences a bankruptcy case, regardless of whether one or both spouses file. The financial circumstances of both spouses are considered by the bankruptcy court. This assessment helps determine eligibility for certain bankruptcy chapters and the household’s repayment capacity.

Income considerations are important, particularly for the means test, which evaluates a debtor’s ability to repay debts under Chapter 7 bankruptcy. Even if only one spouse files, the non-filing spouse’s income is included in the household income calculation for the means test. This aggregated income is then compared against the median income for a household of a similar size in the debtor’s state. If the combined household income exceeds this median, calculations are performed to determine if the debtor has sufficient disposable income to make payments to creditors, which could lead to a Chapter 13 filing instead of a Chapter 7.

The treatment of assets also varies based on marital status and state law. Jointly owned assets, such as a marital home or vehicles, are considered part of the bankruptcy estate, even if only one spouse files. How these assets are handled depends on whether the couple resides in a community property state or a common law state. In community property states, assets acquired during the marriage are considered jointly owned by both spouses, regardless of whose name is on the title, and are subject to division in bankruptcy.

In common law states, ownership is determined by whose name appears on the title or how the asset was acquired. If an asset is titled solely in the name of the non-filing spouse, it is considered their separate property and thus exempt from the filing spouse’s bankruptcy estate. Bankruptcy exemptions allow debtors to protect certain assets from liquidation. These exemptions can apply differently to jointly owned property, with some states offering protections like tenancy by the entirety for real estate, which can shield property from the creditors of only one spouse.

Debt obligations also warrant careful attention when one spouse files for bankruptcy. If a debt is jointly held, meaning both spouses are legally obligated to repay it, the non-filing spouse remains liable for the full amount of that debt even after the filing spouse’s bankruptcy discharge. Creditors can still pursue the non-filing spouse for repayment. Separate debts, those incurred solely by the non-filing spouse, are unaffected by the filing spouse’s bankruptcy.

Information and Documentation for Married Filers

Filing for bankruptcy, whether individually or jointly, requires a collection of financial information and supporting documentation from both spouses. This information provides a picture of the household’s financial standing, which is necessary for completing the required bankruptcy schedules. Gathering these documents in advance streamlines the process.

Debtors must compile records of all income sources for both spouses. This includes recent pay stubs, covering the past six months, and tax returns for the most recent two years. Documentation of income from other sources, such as self-employment, rental properties, or government benefits, is required.

An inventory of all assets is necessary. This involves providing bank statements for all checking and savings accounts, investment account statements, and titles or deeds for real estate and vehicles. Documentation for other possessions, such as retirement accounts, life insurance policies, and business interests, must be included. These details populate schedules such as Schedule A/B for assets.

Information regarding all outstanding debts is important. This includes statements from creditors for credit cards, mortgages, car loans, and personal loans, along with any relevant loan agreements. A list of all creditors, including their addresses and account numbers, is necessary for completing schedules like Schedule D/E/F for debts.

A breakdown of household expenses is required. This involves itemizing monthly expenditures for housing, utilities, food, transportation, and medical care. This information, along with income details, is used to complete Schedule I for income and Schedule J for expenses, providing the court with a clear understanding of the household’s budget. Accuracy and completeness in compiling these documents are important, as omissions or errors can delay the bankruptcy process or lead to complications.

The Bankruptcy Filing Process for Married Individuals

Once all necessary financial information and documentation have been gathered and the bankruptcy petition and schedules are prepared, the filing process begins. Debtors submit these documents electronically to the bankruptcy court, though physical submission remains an option. This submission commences the bankruptcy case.

Upon filing, the court assigns a bankruptcy trustee to the case. The trustee’s role involves administering the bankruptcy estate, reviewing the filed documents for accuracy, and identifying any non-exempt assets that can be used to repay creditors. The trustee also presides over the 341 Meeting of Creditors.

The 341 Meeting of Creditors is held approximately 30 to 45 days after the petition is filed. The debtor, or both debtors in a joint filing, must attend this meeting. While creditors are invited, they seldom appear; the attendees are the debtor(s) and the bankruptcy trustee. The trustee will ask questions under oath to verify the information in the filed documents, such as income, expenses, assets, and debts. Even if only one spouse files, the non-filing spouse’s financial information, especially concerning joint assets or household income, is discussed during this meeting.

Before filing, and again after filing, debtors are required to complete two courses. The first is a credit counseling course, which must be completed within 180 days before filing the bankruptcy petition. The second is a debtor education course, which must be completed after the case is filed but before a discharge can be granted. These courses provide financial management tools and education to help debtors avoid future financial distress.