A joint bankruptcy is an important decision that can have a lasting impact on you and your spouse. Even if only one of you is largely responsible for the joint debt, you are both responsible. A joint bankruptcy will show up on each spouse’s credit report and affect each spouse’s credit scores and ability to get low interest loans for years. If you are considering filing for bankruptcy and you would like to learn more about how your spouse may be involved, a Washington DC or Maryland bankruptcy lawyer can guide you through the process.
Joint Bankruptcy Considerations
The following are some of the factors that couples should take into consideration when deciding whether to file for joint bankruptcy.
- Type of debt and property. There are certain limits for filing a Chapter 13 bankruptcy. If you exceed these limits in a joint filing, you will not be able to proceed with a joint bankruptcy under a Chapter 13 reorganization bankruptcy. Under a Chapter 7 bankruptcy, the court will take your household income into consideration. This can impact the bankruptcy options available to you.
- Amount of community debt. Neither Maryland nor Washington DC adheres to community property rules. In community property states, courts will presume that all property acquired during a marriage is the property of both spouses. Maryland and Washington DC are equitable division states. If a spouse’s name is on a title, deed, or debt, he or she owns the property outright- not jointly. These rules also apply to debts. If a couple does not have a great deal of debt that is explicitly categorized as joint debt, a joint bankruptcy may not be necessary.
- Only married couples can file jointly. This comes into play when a couple is married, has significant debts together, then divorces, and is struggling with deciding how to file for bankruptcy and deal with the debt. A divorced couple can no longer eliminate debt by filing for bankruptcy jointly. Each spouse will have to file individually.
- Prior bankruptcies. If your spouse is barred from filing a bankruptcy due to having filed one in the past or was ever engaged in fraudulent behavior related to a bankruptcy, you will not be able to file jointly.
Advantages of Filing Jointly
- Fewer fees. Filing jointly and filing separately cost about the same. Thus, filing two separate bankruptcies doubles your bankruptcy costs. A single joint bankruptcy eliminates the need to file two separate ones.
- Uniform handling of joint debt. If you do not file jointly and there is joint debt, you will be off the hook for the debt but your spouse is still liable for the joint debt. This can occur with joint credit cards, for instance. Both parties owe the credit card company. If one files for bankruptcy, this does nothing to eliminate the other party’s obligations to pay the credit card.
- Efficient handling of total debt. If you and your spouse have a lot of joint debt, a joint filing is the most efficient way to handle all of this debt with a single bankruptcy. Filing separately will force you to duplicate a lot of your efforts.
A joint bankruptcy is an important decision for a married couple. A couple should not enter into one without the guidance of an experienced bankruptcy attorney. Contact a Boston or Washington DC bankruptcy attorney at the law firm of Kevin D. Judd to learn about the differences between joint and separate bankruptcy filings.