Married filing bankruptcy alone
Should you include your spouse in your bankruptcy petition?
Situations like this are very common, typically one spouse for one reason or another ends up accumulating a mountain of debt or by other circumstances one spouse simply takes on the responsibility of debt alone. Whatever the reason may be for you, it’s probably puzzling you how to go about being married filing bankruptcy alone. It all really depends on who owes what, who owns what and what state you’re in.
Either spouse can file bankruptcy alone in any state, however you have to understand what the laws are in your state as far as how jointly held property is seen. For example California and Nevada are considered community property states. Meaning that in these states whether a married person files alone or with their spouse all community property is considered to be part of the bankruptcy estate, which is liquidated by the bankruptcy trustee to pay creditors before a bankruptcy discharge can be granted.
Typically the filing spouse’s own individual properties or assets will be liquidated first to repay creditors then the non-exempt assets within the community estate will follow. These are properties such as real estate, vehicles and other tangible assets like jewelry and furniture, savings accounts, stocks, and any other assets or earnings that were acquired during the marriage.
States that do not follow community property laws are known as common law states, where only property that is held jointly can be liquidated to pay creditors, if the non-filing spouse holds individual assets he/she does not need to worry about losing anything. Needless to say, community property states certainly complicate the process for any married person needing to file bankruptcy as an individual.
Common mistakes made by individual bankruptcy filers
Once bankruptcy filers become aware of how community property and common law work, they often believe they can get around the system by transferring property to the non-filing spouse or someone else in the family. This is a big mistake and it’s not worth attempting. Should the bankruptcy trustee suspect that to be the case, your bankruptcy file can be seen as fraudulent and all assets may be included in the estate or in other cases the case could be thrown out and the filers may end up paying a fine. Under the new laws, jail sentences are also given if deliberate falsification or fraud is proven. These mistakes are mostly common among pro-se filers, or people who file without a bankruptcy attorney.
Often the non-filing spouse will worry about the effects that bankruptcy will have on their credit. The law states that each individual has a separate credit record and the filing of one spouse should not effect the other. Although it’s also important to consider that debt that is held together, such as mortgages and joint credit card accounts can be an issue. For the non-filing spouse, this could result in negative credit entries if the accounts are in default. This can also mean that the non-filing spouse can now be seen as the person responsible for the debt since the other is under bankruptcy protection.
This is an issue best explained by a bankruptcy attorney, if your case resembles what’s explained here, you should consult a professional at once and get a good and clear picture about how your case will be seen by the bankruptcy court.
You should not pay for a Bankruptcy Consultation, most law offices will give you 30 minutes to an hour of time to explain the process and what you can expect. You can begin your free bankruptcy evaluation here.
