If you’re married, you can file bankruptcy with or without your spouse. Filing individually doesn’t mean your spouse won’t be impacted. Before you choose to file individually or jointly, you’ll want to consider many factors, including what debts and assets you have together, whether you co-mingle your finances, and if there’s a prenuptial agreement.
Yes, you can file bankruptcy without your spouse. You’ll want to look at several factors to determine whether filing bankruptcy with or without your spouse makes the most sense for you. This article will explore some of these factors, then provide an overview of how to file bankruptcy without your spouse.
When Does Filing Bankruptcy Without Your Spouse Make Sense?
It may make sense to file bankruptcy without your spouse if any of the following statements apply to your situation:
Your debts are only in your name.
You signed a prenuptial agreement and keep all your finances separate.
Your spouse may receive an inheritance soon.
Your spouse filed bankruptcy in the past and isn’t yet eligible for a discharge.
You want to preserve their ability to file bankruptcy in the future, if necessary.
When Doesn’t It Make Sense To File Without Your Spouse?
It’s rarely clear-cut whether it makes sense to file a joint bankruptcy or an individual bankruptcy when you’re married. In the end, it depends on your financial situation and what state you’re filing in.
Here are a few common reasons folks may want to file without their spouse that don’t really hold up when you look at the full picture:
You don’t want to impact your spouse’s credit (but you have joint debts). Unless they stay current and pay off all joint debt, their credit score will be negatively affected by your bankruptcy. Any missed payments will show on your spouse’s credit report. Plus, your bankruptcy discharge won’t protect them from debt collectors. If you have individual debts and your spouse’s name isn’t on them, this won’t impact their credit.
You don’t want to include your spouse’s property in the bankruptcy estate (but you live in a community state). All your marital assets are part of the bankruptcy estate whether you file together or not. Even if you’re not in a community property state, if you have joint property, filing alone may not be enough to protect your spouse’s property interests.
What Is the Effect on the Automatic Stay When Only One Spouse Files?
Under bankruptcy law, automatic stay protects you from creditors as soon as your bankruptcy case is filed. It stops almost every legal action, including garnishment, foreclosure, repossession, and any debt collection lawsuit. When you file for Chapter 7 bankruptcy, the automatic stay only applies to you. If you file without your spouse, they’re not protected. If you file a Chapter 13 bankruptcy, there is a co-debtor stay, which protects anyone else listed on your debts.
In a community property state, the automatic stay extends to the community property of married couples. This generally means that the non-filing spouse’s income can’t be garnished for a community debt.
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Is the Non-filing Spouse Protected by the Discharge?
A bankruptcy discharge is the goal of a successful Chapter 7 bankruptcy case. It’s the court order that eliminates your obligation to repay your debts. For any joint debt you have, your spouse won’t be protected by the discharge. Just like any other co-signer, they’re still liable for the debt.
If you’re in a community property state, the “community discharge” will protect your spouse’s community property. It won’t protect their sole and separate property, though. So, if your spouse has or expects to receive separate property, creditors can try to collect from them.
How To Fill Out the Forms When Only One Spouse Files
Let’s take a closer look at the individual Chapter 7 bankruptcy forms where you’ll need to disclose certain information about your non-filing spouse.
Schedule A/B and Schedule C — Assets and Exemptions
Schedule A/B is where you list all of your property, called assets. Schedule C is where you claim exemptions to protect your assets from the bankruptcy trustee. Some exemption amounts can be doubled when married couples file jointly. If you have property that has more equity than your exemptions will cover when filing by yourself, filing jointly may be a way to protect it. This is specific to the exemption laws in your state, so be sure to speak to a bankruptcy lawyer about your joint assets and how to best protect them.
Schedule H — Co-Debtors
This form lists all co-debtors and the joint debts you have with them. If your non-filing spouse is on any of your debts with you, you’ll identify that debt here. If you live in a community property state (or you did at some point in the last eight years), you’ll need to list your non-filing spouse on this form even if you don’t have any joint debt.
Schedules I and J – Income and Expenses
Your non-filing spouse’s financial information is necessary on both Schedule I (which lists income for both the person filing and the non-filing spouse) and Schedule J (which lists household expenses).
The bankruptcy court wants to see total household income, so if you’re both living in the same house and sharing income and expenses, that must all be included. List your non-filing spouse’s separate expenses, including their debt repayment obligations, as part of your Schedule J.
If you don’t live together, you can list your monthly income and expenses separately, but any funds your spouse is contributing to your household expenses have to be listed as a contribution.
The Means Test
The means test determines whether someone is eligible for debt relief under Chapter 7 of the Bankruptcy Code. It’s based on your household income from the six months before filing your bankruptcy petition. Even if you file without your spouse, you have to include their income in the means test calculation. If they have certain expenses that don’t benefit the household, you can subtract those expenses from their contribution to the household income.
How To Deal With a Car Loan When Only One Spouse Files
In a Chapter 7 bankruptcy filing there are three ways to deal with car loans:
You keep everything basically the same including the car loan and its terms. This is called reaffirming your car loan. If you reaffirm your loan, the debt from the loan isn’t discharged.
You borrow money to pay the bank what the car is actually worth and eliminate your responsibility to pay off the rest of the car loan. This is called redeeming your car.
You walk away from the debt and surrender the car to the bank. No matter how much you owe on your car loan, it’s eliminated by the bankruptcy discharge. You get to start fresh with a new (to you) car after filing bankruptcy.
If you have a co-signer on your car loan (whether it’s your spouse or someone else), the rules are a little different and how you choose to deal with your car loan could have a lasting effect on your co-signer’s credit score.
It’s absolutely possible to file bankruptcy without your spouse. The better question to ask yourself is whether it makes sense for you to do so in your current financial situation. If you’re not sure, it can’t hurt to schedule a free consultation with a bankruptcy attorney to help you determine the best strategy to protect your family.