Married couples file for bankruptcy frequently. But did you know you may be able to achieve the relief you need with only one spouse filing for bankruptcy?. Even though filing jointly is often advised, both spouses are not required to file for bankruptcy relief, and in fact, there may be important reasons in addition to credit scores for only one spouse to file. The decision on whether you should file jointly or separately depends on a number of factors:
- Is it necessary for both spouses to file to achieve the desired relief?
- Can you possibly preserve the credit of one spouse?
- How much separate property you each own?
- Which debts do you want to eliminate?
- The effects on your personal credit score
Our Los Angeles debt relief team outlines the main factors you should consider below.
How Much Property You Own
You’ll need to include both you and your spouse’s assets and property in the bankruptcy if you file jointly. Whether you should file jointly depends on what the character of your property is (community or separate) and whether your assets are exempt. Unlike some other states, California does not allow for double exemptions to maintain possession of more property. It is important to speak with an experienced bankruptcy attorney if the spouse without debts owns assets.
One benefit of filing separately is that without filing with your spouse, their separate property will not be put at risk when you file for bankruptcy yourself. Separate property includes property acquired before marriage or inherited property.
Which Debts You Want to Get Rid of
Many may say the whole point of filing for bankruptcy is to eliminate debt. When you file jointly, you and your spouse have the ability to wipe all dischargeable debts that you both owe. Were you to file separately, even if your personal debts have been discharged, your spouse is still liable to fulfill any financial obligations sustained before you were married, although community property, including the spouse’s earnings, is protected by the “community discharge”. An experienced bankruptcy attorney can explain this protection.
On the flip side, if you have a substantial amount of individual debt, and your spouse has very little or none at all, filing alone may be the best course of action.
Your Credit Scores
Although bankruptcy can make a negative impact on your credit score initially after bankruptcy, most filers typically see an increase shortly after the bankruptcy is over. Even still, if you file for joint bankruptcy, both you and your spouse’s credit reports will take a slight hit, if your spouse is a joint signer on any account. However, the hit on your credit is not that long, actually much shorter than the bankruptcy will “remain on your credit”. In fact, for debtors who are already past due on their payments, their credit will actually be higher six months after a bankruptcy filing than if they didn’t file. The reason is that a completed bankruptcy will list debts that were charged-off or past due as “discharged in bankruptcy” four months after most cases are filed. But someone who never files bankruptcy will still show past due and charged-off debts for seven years. Most of our clients have been able to obtain car loans within six months after their bankruptcy discharge and even mortgage loans within several years.
This being said, if you have good credit, and your spouse needs to file bankruptcy for their own personal debts, then it would seem unnecessary to put your good credit score at risk.
You must provide significant amounts of financial information to the court and the bankruptcy trustee when you file, including income for the last few years and your current average income and expenses. You must also attend at least one hearing in front of the trustee, referred to officially as the 341 meeting of creditors. For the last year-and-a-half, these meetings have been conducted by telephone or Zoom.
If you file for bankruptcy jointly with your spouse, you will go to the Trustee Meeting together and only be required to provide one set of bankruptcy documents. As a result, filing jointly with your spouse can simplify the process and typically prove to be more convenient and less expensive than separate filings.
Contact Our California Bankruptcy Team Today
The best way to truly know whether you should file for bankruptcy jointly or separately is to consult with an experienced bankruptcy attorney. Our team can fully assess your financial situation and provide personalized and compassionate guidance to help you get the financial independence you deserve.
If you would like to find out more about how we can help you get rid of debt, get in touch with us today through our website or give us a call at (310) 220-4147 to schedule a consultation.