When financial troubles become too much to bear, some decide to file chapter 7 bankruptcy. If you are married, though, you have the choice to file jointly or not. Depending on where you live, you might want to file jointly to gain certain benefits. On the other hand, there are no laws that say your spouse has to be negatively impacted by your own filing unless they also want to gain the same financial fresh start. To find out more so that you make the right decision, read on.
Variations in Filing
All states allow married couples to file in several ways. You can file jointly, as a single person, or you can both file separate bankruptcy cases on your own. The choice depends on your financial situation, your assets, your state of residence, and more.
The impact of chapter 7 can be considerable for most. However, things are often not as bad as anticipated. Many filers begin receiving credit card offers soon after the bankruptcy is final and they can find their credit rebounding pretty quickly. However, if you are worried about the impact, it might make sense to file a single case as opposed to a joint case. That way, at least one of you will have a better credit score if you are planning to buy a home or obtain more credit. Also, some filers have more debt than their spouse and therefore need bankruptcy relief more than their spouse.
Assets and Exemptions
In some states, couples may be able to double their exemptions if they file bankruptcy jointly. If you hope to protect a lot of assets from seizure and your state allows it, filing jointly could be a smart move. Exemptions are dollar amounts or specifically-named items that are exempt from seizure by the bankruptcy court.
Community Property and Equitable Distribution
Another issue to consider is the way your state looks at married couples. Community property and equitable distribution are not just divorce terms—they apply to marital property in bankruptcy too. The issue of who owns what property can come up if the trustee is considering a seizure to help pay some creditors or other costs. This can affect the rights of one spouse to retain property in a bankruptcy procedure, so discuss this with your lawyer.
The decision to file jointly or separately is a big one and should be carefully considered after speaking with your chapter 7 bankruptcy attorney.