Married couples may find it beneficial for one spouse to file bankruptcy alone. One spouse may hold debts in his or her name alone. The other spouse may want to preserve their own credit rating and credit accounts. While a “married filing single” Bankruptcy can be beneficial in some circumstances, there are some things you will need to keep in mind when considering this option.
Things to Consider
Disclosure of Information: Your non-filing spouse will be required to disclose his or her income, expenses and separate credit accounts. This may include providing copies of pay stubs, bank statements and credit card statements. If you are considering filing bankruptcy without your spouse, you need to make sure they are willing to give this information.
Household Income: Bankruptcy law requires that you disclose household income on the schedules. This includes all income brought into the household by any member of the household. So if your non-filing spouse has income, you must include it. The entire household income, not just that of the filing spouse, determines whether or not you are eligible to file Chapter 7. It is also factored in when calculating your Chapter 13 payment.
Community Assets: You, as the debtor, must disclose all of your assets on the schedules. This includes property owned in common with your spouse. All property acquired by either spouse during the marriage, except for property acquired by gift or inheritance, is community property. Therefore, if your spouse owns a car, a piece of real estate, a financial account, etc in his or her own name, you must include these items if they were acquired during the marriage. You don’t have to include your spouse’s separate property.
The characterization of community or separate property is a technical legal issue that can trip you up when preparing your schedules. You should not try to make this call on your own. If you are filing without your spouse, be sure to disclose all assets owned by you and/or your spouse to your attorney. If there is an item that you believe is separate property, mention that to your attorney and let your attorney make the call.
The Benefit of Filing a Separate Bankruptcy
If you file bankruptcy without your spouse, they will not be listed as a debtor. Their credit will not be affected and they can maintain their own separate credit accounts.
One Final Caveat
A “married filing single” bankruptcy discharges the liability of the filing spouse only. So if both spouses are liable for a particular debt, the non-filing spouse remains liable after the bankruptcy. Therefore, you should consider filing without your spouse only when you are solely liable for the debts at issue.
In conclusion, filing single can be beneficial in situations where one spouse has separately held debts that have become unmanageable. It can provide relief for the filing spouse while preserving the credit rating of the non-filing spouse. Disclosure requirements in these types of bankruptcies can be a bit tricky, however. Rely on your attorney to guide you and if in doubt – disclose! Better safe than sorry. Your bankruptcy case will go much more smoothly if your attorney has a complete picture of your financial situation.
If you are considering filing bankruptcy without your spouse, call us for a free consultation. We can guide you through this process and get you back on track.