How To Know If You Should File For Bankruptcy Alone – Or With Your Spouse

Deciding whether to file for bankruptcy with your spouse or to go it alone isn’t a simple choice.

You know you can file for bankruptcy alone. And if you live in a community property state, you know your spouse gets some of the benefits of bankruptcy without filing.

But that doesn’t help you decide if you should file together or not. It’s a lot more complicated that that.

Will Your Household Benefit Financially?

A marital household is a single economic unit – at least, it should be. Money comes into the household and it combined, then expenses are paid from that pool of income.

When you file for bankruptcy without your spouse, you’re eliminating your debt problems – but only yours. Unless you live in a community property state such as California and are dealing solely with joint debts, you’re still going to need to pay your spouse’s debts after your case is over.

Is your spouse debt-free? If so, there’s no financial benefit to including him or her in the filing.

If, however, your household is still going to be saddled with significant debt afterwards then maybe it’s a good idea to “kill two birds with one stone” by wiping out all of your debts at once. Otherwise, you’re going to have to spend more of your household income on debt repayment.

Do You Need Your Spouse’s Credit?

After you file for bankruptcy, your credit will take awhile to improve.

If your spouse has excellent credit, filing for bankruptcy alone will keep you in the credit game in spite of your discharge.

That means you’ll qualify for new credit – including a car loan and mortgage – more quickly than would otherwise be possible.

Of course, this is secondary to the issue of your spouse’s debt situation. If your household is going to be left with significant debt that will drain your pockets each month then good credit may not be enough. Better to bite the bullet and get rid of the debt altogether before contemplating that new house.

How’s Your Marriage?

If your marriage is good and you live in a community property state such as California, filing for bankruptcy without your spouse may protect you from your creditors.

Remember, though, that the community discharge protections end when the marriage is over. Divorce or death of the filing spouse terminates the community discharge, and collections will continue.

Filing Separately To Hedge Your Bet

If you’re looking to stop a foreclosure, filing for bankruptcy offers a quick and simple way to accomplish that – the automatic stay. The foreclosure has to stop once your case is filed, and you can use the court-ordered repayment plan to bring the arrears current.

If, however, the repayment plan falls through then you may end up getting your case dismissed (thrown out of court). Filing again may not offer you the same automatic stay protections.

Your spouse, however, can file a new bankruptcy case and get the full benefit of the automatic stay – even if your solo bankruptcy case didn’t work out.

No Easy Answers Without Deep Analysis

Part of my job as a bankruptcy lawyer – in fact, part of any good lawyer’s job – is to ask questions that will help make the decision easier.

It’s not a quick analysis, but you’re dealing with your financial future. Getting the wrong answer could cost you a lot of money, stability, and difficulties.

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.