Whether both spouses should file for bankruptcy or just one spouse is a
nuanced decision that can have ramifications on whether the household
debt is discharged. Often times, bankruptcy is a necessity due to a looming
foreclosure sale, creditors who have judgments, garnishment or defaults
on credit card payments. However, it is important to decide whether one
spouse or both should file for bankruptcy and the impact it may have on
a spouse whom decides not to file.
Before filing bankruptcy, it is important to find out if one or both spouses
are responsible on the outstanding financial obligations. It is also important
to consider debts that often get overlooked and may not show up on a person’s
credit report, such as medical bills and repossessions. Often times, only
one spouse is financially obligated on a debt. When it comes to home buying,
the promissory note is the important document to look at. Similarly, with
credit cards, the credit agreement is the determining factor. Remember,
being an authorized card user or on the deed or mortgage of a home does
not mean you are responsible for making payments on the debt – and
only one spouse may need to file bankruptcy – not both.
If you are filing due to a looming foreclosure or for other secured property
reasons, it is also important to determine whether a second or junior
lien will be stripped off or if a first or senior lien will be crammed
down. In the Southern District of Florida, if both spouses signed the
promissory note, for a lien to be altered or effected, both spouses must
file bankruptcy in order to modify their lien. For example, if you have
a second mortgage that both you are your spouse are obligated on and the
property is underwater as a result of the first mortgage, both spouses
must file a joint bankruptcy to rid themselves of the second mortgage.
An experienced bankruptcy attorney can advise a family whether it is in
their best interest to have one or both spouses file bankruptcy, and the
potential impacts of either decision.