Many people file for bankruptcy wondering if their spouse should file too. In today’s society, many people enter marriages or even second marriages with debts from their past. In some cases, one partner is nearly debt-free and the other partner will be buried under past debts with no way out. Liability for debt belongs only to the person who incurred it. So, if a person has $50,000 in credit card debt before marriage, their partner is not required to pay it. In fact, another spouse may have outstanding credit and being included in the bankruptcy filing will give them a big red B. on their credit report and drag them down because of their spouse. When filing for Chapter 7 bankruptcy, only the debtor who incurs the debt must be in the bankruptcy petition. The only way a couple wants to file together is that they have debts that they accumulated during their marriage and cannot be paid due to financial problems.
When someone files for bankruptcy to stop a foreclosure it can sometimes get complicated and that is why it is a good idea to use a bankruptcy attorney to work on these matters. The only people who technically need to file for bankruptcy are the homeowners. Once bankruptcy is filed, the automatic suspension goes into effect and the sale of foreclosure homes will stop. When a spouse files and they jointly own the property, only 50% of the property is required to be protected by bankruptcy exemption laws. In fact, when individuals file bankruptcy petitions and register their property, when they value it, they will value the property half as much because their spouse technically owns the other half.
There are several different cases that will work in favor of a couple filing bankruptcy together and they usually involve protecting assets. Bankruptcy attorneys will usually think about both and give a couple of the pros and cons of filing for Chapter 7 bankruptcy singly and together. Basically, it depends on how intertwined the couple’s finances are. The more associated with new credit since the marriage, the more likely it is for the bankruptcy attorney to think that a joint bankruptcy filing is best.
Back in 2005, Congress changed the bankruptcy code and made it more difficult to file for Chapter 7 bankruptcy. Included in the changes was the addition of a test average that requires individuals to file Chapter 7 to qualify. Individuals filing for bankruptcy must make less than their state’s average income to qualify to file for Chapter 7. The average income is based on the individual’s household income and needs to include the income of the spouse if both are working. Today, many people get married with a lot of burdens and debts. Individuals will decide to file for bankruptcy and erase all of their past to get a fresh start with their new partner. This is where the problem starts, if the new spouse makes a lot of money to contribute to the household, the individual may no longer be eligible to file for Chapter 7. Often times, in these situations if the debtor simply goes and gets advice from a bankruptcy attorney before getting married, they would find out that they should have filed for bankruptcy before getting married.