Should You File For Bankruptcy Jointly?
If you can take on debt with your spouse, can you file bankruptcy together? Yes, you can. But you can also file separately. The question then quickly shifts to which one you should do. There are multiple things to consider and to discuss with your attorney before doing either one.
What Is Joint Bankruptcy?
When you file for joint bankruptcy, you are effectively “discharging” the eligible debts that you took on together, and as individuals. After filing for bankruptcy, the courts will ultimately “discharge” certain debts, and you will no longer have to pay them—nor can your creditors get you to pay them.
If you and your spouse are considering filing for joint bankruptcy, there are several reasons why:
- You can discharge debts that you took on together—and ones you incurred separately.
- Instead of two lawyers, you can hire one to represent you both.
One of the many reasons you hire an attorney to represent is because you need to submit a bankruptcy petition. It is considerable in length. And it requires a great number of financial details.
When you file jointly, this will only have to be completed once. Another reason why you should consult an attorney is that the laws for filing jointly differ by state. For example, a bankruptcy exemption allows you to protect a specific amount of your property. In some states, when you file jointly, the exemption amount doubles.
However, your attorney may advise you to consider filing a different way. If one spouse has a significant amount of debt in their name, it doesn’t make sense for both people to file. This will allow one person to retain their credit score, which will be ideal for the future.
An attorney will look over your exempt and nonexempt assets. Based on who owns what, he or she can advise you on how to file. Not all bankruptcy options are the same. And your attorney will help you to choose the one that benefits you the most.
People who get married later in life might have completely different financial situations. They will likely not have the same credit scores and assets. It doesn’t make sense for both people to file together if one person is in debt and already has a poor credit history and score. The result would put some assets at risk. And both credit scores would be diminished.
There are, however, community property states. If you live in one of these states, all of the marital property can be taken. Even if the title is under your name and your spouse is filing for bankruptcy, your property will be at risk. The following are community property states: Washington (state), Nevada, Arizona, New Mexico, Wisconsin, Louisiana, Texas, Idaho, California,
Filing for bankruptcy is not the end; it is a new beginning. It is important to make the right decisions now to set yourself up for the future. At Maxwell Dunn, we will advise you on which decisions are in your best long-term interest. Contact us today to schedule your consultation.See all videos