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Married couples share many aspects of their lives, including finances, which can make filing for bankruptcy a complicated decision.  In this article, our Roseville Chapter 13 bankruptcy attorneys discuss a few key aspects of how filing for bankruptcy can affect your spouse, including whether you are liable for your husband or wife’s debts, filing for bankruptcy without your spouse, and some of the reasons to consider – or avoid – filing jointly with your husband or wife in California.

Are You Liable for Your Spouse’s Debts in Chapter 7 or Chapter 13 Bankruptcy?

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When you file for bankruptcy, your objective is to obtain a discharge, which will eliminate your liability for dischargeable debts, such as credit card debt and medical debt.  However, unless you are filing jointly with your spouse, only your financial liabilities are affected.  If you file for bankruptcy but your spouse does not, he or she will still be responsible for any debts you held jointly (in addition to any personal debt he or she may have, which will also be unaffected by your bankruptcy).

When you file for bankruptcy, you immediately trigger an injunction, or court order, known as the “automatic stay.”  The automatic stay remains in effect for the duration of the bankruptcy, and generally prevents creditors from taking collection actions.  Critically, the non-filing spouse will not be protected by the automatic stay, which means that creditors can continue contacting him or her about jointly-held debts.  For these reasons, filing jointly is often appropriate in situations where most of the couple’s debts are shared.

Conversely, filing individually makes more sense if the debts are primarily held by one spouse.  If you have considerable debt, but your spouse has little debt of his or her own, filing jointly may be inappropriate – particularly because there are time limits that restrict the number of discharges you can obtain within a certain time period.  If you declare bankruptcy but your spouse does not, he or she will retain the option of filing at a later date should doing so become necessary.  Moreover, because bankruptcy will, at least initially, have a negative impact on your credit score, it makes little sense for both spouses to file if only one person is actually in need of debt relief.

Can I File Chapter 13 without My Spouse?

The short answer to this question is yes, you can file for Chapter 13 bankruptcy (or Chapter 7 bankruptcy) without your husband or wife.  There is no law requiring married couples to file jointly.

Ultimately, the decision to file jointly or separately must be evaluated by each couple – ideally with help from an experienced Chapter 13 or Chapter 7 bankruptcy lawyer in Roseville.  A bankruptcy strategy that proves pragmatic for one couple may be entirely inappropriate for a different couple.  It simply depends on each couple’s unique financial situation, including not only their present circumstances, but also their financial goals for the future.

Advantages of Filing a Joint Bankruptcy for Married Couples

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Just as there are reasons to avoid filing jointly, there are also some situations where a joint bankruptcy makes financial sense.  For example, it might make sense to file jointly if most of your debt is shared and is of a dischargeable nature.  Here are two benefits to filing for bankruptcy jointly with your wife or husband:

  1. There are court fees and other costs associated with filing for bankruptcy.  If you file jointly, you will share a single petition with your husband or wife, which means you will save money by “killing two birds with one stone.”  For reference, it costs $335 to file a Chapter 7 bankruptcy petition and $310 to file a Chapter 13 bankruptcy petition in California bankruptcy court.
  2. If you file together, you may be able to double your exemptions, which are used to protect property from sale by the trustee assigned to your case.  For example, personal property exemptions can help protect your appliances, furnishings, vehicles, jewelry, family heirlooms, and other valuable items.

California Bankruptcy Lawyers Serving Sacramento and Roseville

Every married couple is uniquely impacted by different legal and financial factors.  By discussing your situation in depth with an attorney, you and your husband or wife will be empowered to make an informed decision about which course of action is most suited to achieving your goals.  Bankruptcy is a major financial decision, and before you file any paperwork, it is in your family’s best interests to make sure that you are represented by a skilled and knowledgeable California bankruptcy attorney who can sit down with you to determine who is responsible for which debts, how your property and assets are divided, and how to approach the situation in a practical, efficient, and cost-effective manner.

To talk about your California bankruptcy case in a free and completely confidential legal consultation, contact The Bankruptcy Group at (800) 920-5351.  We have extensive experience assisting married couples and single individuals with joint and individual bankruptcy filings in the Sacramento and Roseville area.