If you and your spouse are struggling with debt, bankruptcy may be a good option for getting your finances back under control. But how will filing affect your spouse? And can one spouse file bankruptcy without the other?
In order to determine whether filing jointly or separately is best for you, you will need to assess your situation, as well as your goals. A Memphis bankruptcy attorney can help you weigh the pros and cons of each option.
When Is Filing a Joint Bankruptcy the Best Option?
Whoever files the bankruptcy petition must list all the debts that are in their name. So if one spouse files for bankruptcy while the other doesn’t, any debts held jointly would not be discharged in the bankruptcy. In other words, you’d still be on the hook for them once the bankruptcy has ended. Therefore, couples with extensive jointly held debt would benefit more from filing jointly than they would separately.
Filing jointly also allows both spouses to benefit from the automatic stay. And it saves a little money, since you would only have to pay for one filing fee as opposed to two.
However, one con to keep in mind is that you and your spouse will both experience a negative hit to your credit report. This could make it difficult to apply for credit immediately following the bankruptcy, although you will be able to rebuild your credit in time. If you want to buy a home in the future or apply for a business loan, you may want to consider filing separately.
In addition, if one spouse owns significant property and you decide to file jointly, that property would be subject to liquidation in a Chapter 7 filing.
When Is Filing Bankruptcy Separately the Best Option?
If one spouse files for bankruptcy separately, only debts that are in the filing spouse’s name would be eligible for bankruptcy discharge. So if most of the debts are in one spouse’s name, filing one petition for that spouse is probably the best option.
Additionally, if one spouse has significant assets, those assets would be protected from a Chapter 7 liquidation.
Conversely, however, only the filing spouse will benefit from the automatic stay. Filing separately also means that only one spouse’s credit report would be impacted. If the non-filing spouse has a decent credit score, the filing spouse may be able to rebuild their credit more quickly with the help of the non-filer, who could co-sign future loans or credit cards.
Speak to an Experienced Memphis Bankruptcy Attorney Today
So the question of “can one spouse file bankruptcy alone?” is more a question of “should one spouse file alone?” The truth is, it depends. A bankruptcy attorney can help you assess your situation and determine whether filing jointly or separately makes sense for you. To learn more, contact The Sweeney Law Firm, P.C. today.