Marriage doesn’t create a personal obligation on behalf of both spouses to be liable for a debt. Liability for credit cards and home loans arises by agreement and is incurred by those who sign the loan or credit application. An exception is that the filing of a joint tax return obligates both spouses for the payment of the total tax due. A creditor with a claim against a spouse may only collect its debt from the separate property of the spouse.
When it comes to married couples and filing bankruptcy, both spouses do not need to file a bankruptcy jointly. A married individual may file a joint or individual bankruptcy case during a marriage or ongoing divorce matter. However, depending on the type of bankruptcy case, a non-filing spouse may not be protected from a creditor’s collection activities.
If spouses are jointly liable to a creditor, the Chapter 7 bankruptcy of one spouse does not relieve the other of the obligation to pay the debt. Thus, a creditor may pursue the other spouse for payment. In contrast, for debts that are consumer debts to be paid 100% through the plan in a Chapter 13 case, the co-debtor non-filing spouse is protected by the co-debtor stay provided by federal law.
Despite only one spouse filing for bankruptcy, the court still considers household income from both spouses to determine eligibility to file a Chapter 7 or Chapter 13 case. Thus, in cases where a filing spouse has less disposable income than a non filing spouse, the income of both will be reported on the “means test.”
If household income is more than the qualifying median income required for filing Chapter 7, the filing spouse may have to file a Chapter 13 case. A Chapter 13 case may protect assets that would otherwise not be exempt, especially in cases where both spouses have a need to file jointly because they both have substantial debt.
Financial problems are one of the primary reasons for divorce. While a Chapter 13 case may facilitate a change in circumstances, perhaps even divorce, it’s generally unwise to file if the odds are that the marriage isn’t going to survive.
Many Chapter 13s do not get finished successfully. If a case does reach completion, dealing with the aftermath may be challenging. As much as a Chapter 13 bankruptcy filing may help finances, it is a long, arduous, stressful process that requires some degree of stability and consistency.
If you are married and considering bankruptcy, you must determine which is best for you: filing a joint bankruptcy or an individual bankruptcy petition. For most couples, joint bankruptcy will protect more assets and discharge more debt. The analysis is complicated and necessitates the assistance of an experienced and knowledgeable bankruptcy attorney. Filing for bankruptcy is a huge decision that may have both short-term and long-term financial consequences and effects. Whether you are married or single, the experienced South Florida defense attorneys at Loan Lawyers are here to review your potential bankruptcy case.
To schedule a free consultation at any of our three conveniently located offices, contact Loan Lawyers today by calling 954-523-HELP (4357).