When you and your spouse married, you may have merged your finances along with other aspects of your lives. Joint bank accounts, mortgages and car payments are not only convenient, but solidify your commitment to a life together. Of course, with these merged accounts also may come shared debt problems. If you and your husband or wife are struggling to pay your bills, you might have discussed the prospect of filing bankruptcy.
This decision shouldn’t be taken lightly, and it’s not just a question of “should we or shouldn’t we?” What if one spouse brought more debt to the relationship than the other? Should that person file individually, or should you file together as a couple? The answer is rarely simple, but here are some things to keep in mind as you decide how to resolve your debt issues together.
Shared debt is one of the most obvious reasons to file as a couple. If both of you are on the deed to your home and your family car loan, a joint petition is probably in your best interest. If just one of you files, your creditors can still go after the other spouse for repayment of these jointly held debts.
Filing jointly will also save you money on the cost of legal fees, especially if there’s possibility that both of you would otherwise need to file separately.
If you file jointly, all of your individual debts will be included, provided they’re dischargeable. Bear in mind that student loans, child support and some other types of debt can’t be forgiven through bankruptcy. If the bulk of an individual spouse’s debt cannot be erased through Chapter 7, the other spouse may want to file on their own.
What are some other situations where filing jointly might not be optimal? Perhaps one of you has a credit card with an unmanagably high balance, while the other has little to no individual consumer debt. In a case like this, protecting the lesser-indebted spouse’s assets makes sense. Bear in mind, however, that if you choose to file alone, your spouse’s income and debts will still be a factor in the court’s decision.
You should also consider the all-important means test, which determines your eligibility for Chapter 7 bankruptcy. This standard formula weighs your average monthly income against your state’s median income. If your combined incomes make you ineligible for a joint Chapter 7 petition, filing separately may be your best option.
If you’re on the fence, let an experienced bankruptcy attorney help you determine what’s most advantageous for you and your spouse. Whether you file together or separately, you’ll get the assistance you need and the confidence that you and your spouse are on the right path to financial solvency.