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Bankruptcy Considerations for Married Couples

Married couples have additional considerations to think about before filing Chapter 7 or Chapter 13 bankruptcy. A major decision for married couples is whether to file jointly or separately.

Some factors that married couples should consider include:

  • How much debt does each spouse have? If one spouse files, the other spouse may still have debts. 
  • Are there assets or properties you want to protect? You will have to determine if the bankruptcy exemptions can protect all of your property. 
  • Costs for a joint bankruptcy attorney are lower than two individual bankruptcies.

For more information on whether you should file jointly or separately, contact the Law Offices of Julio Portilla PC.

When Couples Should File for Bankruptcy Jointly

When filing bankruptcy jointly, both parties in the marriage file a single set of bankruptcy papers with the court. A joint bankruptcy requires that all property, debts, expenses and income for both parties must be revealed. 

Joint bankruptcy may make sense if:

  • You want to wipe out the dischargeable debts for both spouses. In a joint filing, all joint and individual debts are included. Like debts, all joint and individual property is also included in this type of filing.
  • You have enough exemptions to protect jointly owned property. If you are in a state such as New York, married couples are allowed to double their exemptions when filing jointly, which can help you keep more of your property. If one spouse has significant property that is nonexempt, he/she may want to file separately. 

The benefits of joint bankruptcy are that the costs are lower and the process is efficient.

It is important to remember that the non-filing spouse if filing independently, still has to be disclosed but it is not included in the bankruptcy paperwork and the non-filing spouse is not required to attend hearings regarding the bankruptcy.

When Couples Should File for Bankruptcy Separately

In some cases, it may make sense for couples to file separate bankruptcy cases if:

  • One spouse has properties they want to protect. Filing separately means that the non-filing spouse's separately owned property won't be considered as a part of the bankruptcy estate, and will not be affected in the bankruptcy.
  • One spouse has had a previous bankruptcy discharge. You may have no choice but to file alone if your spouse has had a previous discharge - Chapter 7 within the last 8 years, or a Chapter 13 case in the past 6 years.  
  • One spouse acquired most or all of the debt, or you were married recently. Filing separately in these cases can protect the other spouse and help them maintain good credit, keep their separate property, and avoid the legal troubles of bankruptcy. 

Filing individually does not mean that the spouse is not impacted. The impact to the spouse depends on whether the couple resides in a community property or a common law property state.

  • In community property states, property that is acquired during the marriage is seen as owned equally by both parties, regardless of whose name is on the title. But in common law property states, if your name is on the title or if you purchased it then it’s yours. In common law property states, the individual’s separate property becomes part of the bankruptcy filing. In community property states, all community property becomes a part of the bankruptcy.

New York is considered an equitable distribution state meaning that marital property is divided in a way that is fair, but not necessarily equal.

Bankruptcy for Same-Sex Couples

As of June 26, 2013, legally married same-sex couples are able to file a joint bankruptcy petition. However, same-sex couples who are not legally married still can not file a joint bankruptcy petition. Therefore, where a same-sex couple resides dictates both their legal marital status and their ability to file a joint bankruptcy petition.

The bankruptcy attorneys at the Law Offices of Julio Portilla PC will make sure that you get what is fair and what you deserve, and are able to serve a diverse population, including Spanish-speaking clients.

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