Should Married People File for Bankruptcy Jointly or Individually?

Married people who are in financial straits have the option of filing jointly for bankruptcy, but that doesn’t always mean they should. Since assets and expenses are often shared in a marriage, it’s common for the money troubles of one spouse to impact the other. But sometimes one spouse has more property and the other more debt, so that a bankruptcy filing will not necessarily benefit both spouses equitably. Deciding whether to file for bankruptcy jointly or individually depends on weighing multiple factors.

Here are the pros and cons of filing for bankruptcy jointly:

• Pro: Cost Savings — Filing jointly can be more cost-effective as it involves a single proceeding, potentially lower court costs and only one attorney’s fee. It may also result in a quicker resolution compared to two individual cases.
• Pro: Greater Debt Coverage — Joint filing allows for a comprehensive discharge of debts, whether they are jointly or individually assumed. This can provide a fresh start for both parties.
• Pro: Maximized Exemptions — Married couples can double their exemption limits when they file jointly. This means that they can protect more of their assets from being liquidated.
• Con: Ineligibility — Chapter 7 bankruptcy has income eligibility requirements. The combined income of both spouses might make them ineligible under the means test.
• Con: Negative Impact on Credit — If one spouse has a significantly higher amount of debt and a poorer credit history, filing jointly could negatively impact the credit of the other spouse. A bankruptcy will appear on both spouses’ credit reports, which could make it difficult to obtain loans or credit cards in the future.

Conversely, there are these pros and cons of one or both spouses filing individually:

• Pro: Protecting Credit — If one spouse has good credit, filing separately can protect their credit score from being tarnished by the other spouse’s bankruptcy.
• Pro: Protecting Assets — If one spouse has substantial separate assets, filing individually can shield those assets from creditors. However, one spouse may not put property in the other’s name to keep it out of reach of creditors, which can be deemed a fraudulent transfer.
• Con: Greater Expense — Separate filings can be more expensive, requiring two lawyers and two sets of bankruptcy proceedings.
• Con: Debt Exposure for the Non-filer — If the couple has joint debts, filing separately will not discharge those debts. This means that one spouse could still be sued for the debts, even if the other spouse is discharged.

Every couple’s situation is unique, and discussing your case with an experienced bankruptcy attorney can help in making informed decisions.

Jeff Field & Associates in Scottdale, Georgia concentrates its practice on bankruptcy and debt relief. Our firm serves individuals throughout the metropolitan Atlanta area. Contact us online or call 404-381-1278 for an initial consultation.