Declaring bankruptcy can be an individual or family decision. A married person in Georgia can file for Chapter 13 or Chapter 7 solely or jointly petition with their spouse. Which path to take depends on a host of factors that require close analysis and guidance from a skilled bankruptcy professional.
You may consider filing individually for bankruptcy if it is your personal debt that is unmanageable — for example, if your debt is largely due to credit card bills to which your spouse is not co-signed. Filing separately may serve to protect the non-filer’s separately owned assets from liquidation. Another benefit of filing as an individual is that your spouse’s credit score will not be affected, so your household may retain a level of buying power that would not exist if you filed a joint petition.
However, there are several complications to filing separately. For one, it may make it harder to satisfy the Chapter 7 means test — which determines whether the debtor’s disposable income (after living expenses) is low enough to be eligible for this form of bankruptcy. If the spouses are in the same household, the non-filing spouse’s income will be included in that determination.
Fortunately, there is a marital adjustment deduction available for just these circumstances. It allows for the non-filing spouse’s income to be excluded over and above the amount that goes to paying for household expenses, such as rent, mortgage, taxes, utilities, groceries and other shared goods and services. The marital deduction is separate and apart from the amount the filing spouse can deduct for his or her own living expenses to determine disposal income.
Another potential issue concerns interspousal property transfers. If one spouse places assets in the other’s name to put them outside the reach of creditors, the transfer can be deemed fraudulent and set aside by the bankruptcy trustee. Among the common “badges” or fraud are where property is gifted, sold for less than fair market value or kept within the original owner’s control. Timing is also important. Under Georgia law, a trustee may look back to any transfer made within four years before the debtor files for bankruptcy.
Couples who have marital debt — either because each spouse has their own debt or spouses share debt as co-signers — may benefit from filing a joint petition, rather than two individual petitions, to save on court fees and legal costs. Married couples in Georgia are allowed to exempt $43,000 worth of their marital residence, protecting that property from creditors and liquidation. An individual filer is able to exempt only half of that, $21,500.
The experienced Georgia bankruptcy lawyers at Jeff Field & Associates help married couples understand the possible positive and negative outcomes of filing for Chapter 13 or Chapter 7 bankruptcy. To schedule your free initial consultation, call 404-381-1278 or contact us online. Our offices are conveniently located in Scottdale, Marietta, Douglasville, Gainesville, Lawrenceville and Athens.
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