If you can take on debt with your spouse, can you file bankruptcy together? Yes — but you can also file separately. The question quickly becomes which one you should do. There are multiple things to consider and discuss with your attorney before doing either.
What is joint bankruptcy?
When you file jointly, you're effectively discharging the eligible debts you took on together and as individuals. After filing, the courts discharge certain debts and you no longer have to pay them — nor can your creditors make you.
Filing jointly
There are several reasons couples file jointly: you can discharge debts you took on together and separately, and you can hire one lawyer to represent you both. The bankruptcy petition is considerable in length and detail — filed jointly, it's completed once.
Laws for filing jointly differ by state. A bankruptcy exemption lets you protect a specific amount of property, and in some states that exemption doubles when you file jointly. But your attorney may advise a different approach: if one spouse has significant debt in their name, it may not make sense for both to file — letting one person retain their credit score for the future. An attorney reviews your exempt and nonexempt assets and advises how to file, because not all bankruptcy options are the same.
Filing separately
People who marry later in life may have very different financial situations, credit scores, and assets. It doesn't make sense for both to file together if one person is already in debt with a poor credit history — the result would put some assets at risk and diminish both credit scores.
There are, however, community property states, where all marital property can be reached even if the title is in your name and only your spouse files. Those states include Washington, Nevada, Arizona, New Mexico, Wisconsin, Louisiana, Texas, Idaho, and California.
Filing for bankruptcy is not the end; it's a new beginning. It's important to make the right decisions now to set yourself up for the future. At Maxwell Dunn, we'll advise you on the decisions that serve your best long-term interest. Contact us today to schedule your consultation.
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