Marriage is union between two people. This often means that the couple shares a financial situation. However, there are occasions where one spouse may rack up an insurmountable debt and wishes to file bankruptcy to discharge that debt. The other spouse may not be as eager to join in the discharge, or may not feel that he or she should be held responsible for the financial situation of another person.
There is no requirement that a husband and wife jointly file bankruptcy. If most debts are owed only by one spouse, it may be appropriate for that spouse to file for bankruptcy alone. However, if one spouse does file for bankruptcy in order to discharge debts, the other spouse may be held responsible for repayment of some debts, such as jointly-owned credit card debt or medical debt. This is a difficult and tricky legal situation to navigate, and it is in your best interest to contact a knowledgeable bankruptcy attorney in order to determine what each person's liability will be.
If the indebted spouse has most of the debt in his or her name alone, joint filing may not be the best option. The other spouse is not responsible for paying off the debt. Also, it may be the case that the spouse who is not in debt has numerous protected assets or may stand to inherit a great deal of money. In that situation, a joint filing may not be advisable.
A joint bankruptcy filing may be the best option if the non-insolvent spouse has few resources or has all his or her assets intermingled with the filing spouse. Filing jointly avoids unpleasant situations where the creditors attempt to reclaim the filing spouse's debts by going after the non-filing spouse's assets. Filing jointly for bankruptcy often affords couples a more simple financial transition.
A careful review of the debt structure is in order. For example, jointly owned property may be affected if only one spouse files. In most cases, both the husband and wife have the same debts or have cosigned the same loan agreements, or medical debt. If only one spouse files for bankruptcy where this is the case, the creditors can continue to demand payment from the spouse who did not file.
They type of bankruptcy a person files does not necessarily alter the responsibility of the underlying debt. If one spouse co-signed a loan for the spouse who is declaring a straight Chapter 7 bankruptcy, that spouse may still be held responsible. If the spouse declaring bankruptcy files a Chapter 13 bankruptcy, the legal and collections actions against the non-filing spouse will be suspended for the duration of the proceedings. However, the creditors will have to option to pursue the amount from the co-signer once the bankruptcy proceedings have ended. Your attorney will have the most accurate information about your particular situation.
In almost all cases, if one spouse decides to file for bankruptcy on a medical debt or a debt co-signed by both spouses, the responsibility lays with both. This may continue to be true even after a divorce, if one spouse co-signed a loan with the other or received medical services during marriage, despite the language in the divorce decree.
It is in your best interest to discuss your choices with an experienced bankruptcy attorney in order to determine what your best options are.