Can I file bankruptcy without my spouse in 2020?

Yes, you can file bankruptcy without your spouse. A variety of factors play a role in determining whether filing bankruptcy with or without your spouse makes the most sense for you. This article will explore some of these considerations, then provide you with an overview of how to file bankruptcy without your spouse. 

When does filing bankruptcy without your spouse make sense

There are circumstances when it makes sense to file bankruptcy without your spouse. If the debts that are causing your financial difficulty are only in your name, it can make sense to file on your own. It’s important to check, however, if you live in a community property state. If that’s the case, there is community liability for all marital debt, regardless of whose name is (or isn’t) on it. If you are in a community property state, however, any discharge from bankruptcy will protect the wages of both spouses so long as they remain a  married couple.

It can also make sense to file without your spouse if they are wealthy and you signed a prenuptial agreement since that is already keeping your finances separate. Additionally, if you have a spouse who may be expecting an inheritance soon, filing alone can help them to preserve that inheritance as your spouse’s separate property, so long as they keep it in their name only and don’t commingle any of the funds. If your spouse has filed a bankruptcy in the past, they might not yet be eligible for discharge again. And finally, if you file on your own that preserves the option of your spouse filing a bankruptcy in the future, should it become necessary. 

When filing bankruptcy without your spouse doesn’t make sense

Filing without your spouse to preserve their credit is generally not a good enough reason to file without them. Presuming that you’re joint holders of the debt in issue, their credit has already been impacted. Additionally, getting a discharge on the joint debt will only relieve you of the obligation to pay. You can check on your credit report to confirm when your spouse is listed on any debt. If your spouse is listed on joint property, the creditor can still come after them for the full amount. It’s also not a good idea to file on your own if you’re trying to protect your spouse’s assets. If the assets in question are “marital assets” then they will be part of the bankruptcy estate regardless.

What is the effect on the automatic stay when only one spouse files? 

The automatic stay is powerful protection available to people as soon as they file a bankruptcy case. The automatic stay will halt almost every other legal action, such as a garnishment, foreclosure, repossession, or divorce until the bankruptcy case is over. When you file for Chapter 7 (liquidation) bankruptcy, the automatic stay only applies to the person or people filing the case. If you file a Chapter 13 (reorganization) bankruptcy, there is a co-debtor stay that also goes into effect, which protects anyone else listed on your debts. In a community property state a non-filing spouse’s community property is protected by the automatic stay, regardless of whether they are listed on the debt.

Is the non-filing spouse protected by the discharge?

The discharge in bankruptcy is the result of a successful case when you can walk away from some or all of your debts. If you receive a discharge on a joint debt you are no longer legally obligated to pay it, however, if your spouse did not also file, they are still liable for the full amount of that debt. So, from a practical standpoint if you and your spouse share finances, the fact that you can walk away but they remain on the hook, won’t solve the problem of not being able to afford the payments. In community property states your discharge will protect any community property for your non-filing spouse, but not any of their sole and separate property. In non-community property states the discharge will only protect you, not your non-filing spouse.

How to fill out the forms when only one spouse files

Even though it’s possible to file a bankruptcy case without your spouse, you will need to include certain information about your spouse in the bankruptcy forms you’re submitting to the court as part of your Chapter 7 bankruptcy. Let’s take a look at what you’ll need and where you’ll need to disclose it. 

Information and documents you’ll need

When you file individual bankruptcy, you will still need to include information about your spouse. Whenever you file bankruptcy you need to show that you properly qualify for the type that you file based on your last 6 months of income. The court wants to see your household income for that period, which will include pay stubs and any other proof of your income and your spouse’s income. You’ll also need to include a list of marital assets that were purchased after the marriage (regardless of who purchased the items.) You will need to include information for any debts where your non-filing spouse is a co-signer, as well as information on any life insurance policy they hold where you’re the beneficiary.

Where to disclose this information

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

You will be listing your assets and liabilities in a part of your bankruptcy forms called the schedules. There are different schedules for different information. It’s important to note that you will be signing under penalty of perjury that you have been accurate and complete to the best of your ability, so make sure to include everything, including all marital assets on Schedule A/B. One thing you should consider is the o equity in the assets that you want to protect. On Schedule C you can list exemptions, which allows you to protect various items up to certain dollar amounts. Depending on the equity you have in these assets, it may make sense to file a joint bankruptcy simply to allow you to double the exemptions, if that’s not otherwise possible in your state. If your primary purpose for filing the bankruptcy is to protect an asset, you should speak with a bankruptcy lawyer, most of whom offer a free consultation,  to figure out the best strategy for you and your spouse. 

Schedule H - Co-Debtors

There is a schedule that is just to list any co-debtors, Schedule H. You’ll need to identify all debts where your non-filing spouse is jointly obligated. If you live in a community property state you will need to identify your spouse on this schedule even if you don’t have joint debt. 

Schedules I and J - Income and Expenses

Your non-filing spouse’s name is necessary on both Schedule I (income) and Schedule J (expenses.) Again, the court wants to see total household income, so if you are both living in the same house and sharing income and expenses, that must all be included. In this scenario, you should also list your non-filing spouse’s separate expenses, including their debt repayment obligations, as part of Schedule J. If you don’t live together, you can list your monthly income and expenses separately, however, if your spouse is contributing any funds toward your expenses you must list that contribution. 

The Means Test 

Whenever you file for bankruptcy you need to complete the Means Test to determine which chapter of bankruptcy you can file. The Means Test is based on the 6 months of household income before you file your case, so any (or all) income from your spouse that goes toward joint expenses must be included. Even if you intend to file completely on your own you can’t get around this requirement for eligibility. You can, however, also include a marital deduction to exclude any payments or expenses by your non-filing spouse that are not for the benefit of the household from the calculation of you household income.

How to deal with a car loan when only one spouse files

In any bankruptcy filing when you are making payments on a car, you generally have three options available. You can voluntarily take on the debt and sign a reaffirmation agreement, which means that you intend to continue to make your payments under the car loan. If you believe that your car is worth less than the amount that you still owe on it you can try to redeem it instead. If you are behind on your car payments or it’s simply too expensive to keep, you can also surrender the car in your bankruptcy, which helps you to walk away from any late fees, penalties or interest as well. Folks who want to keep the car and it’s titled jointly with their spouse, who is also on the loan, often decide to retain and pay pursuant to the contract with the non-filing spouse. This allows them to discharge their personal liability on the debt and keep the car. 

Conclusion

It is completely possible to file for bankruptcy without your spouse. The better question is whether it makes sense for you to do so in your current financial situation. If you are not certain whether it is best to file on your own or jointly you can consult a bankruptcy attorney to help you determine your best next steps.