“J” Is For Joint Bankruptcy Filing

Green JayMost married couples do most everything together but that doesn’t mean they want to file a joint bankruptcy together. Well, they don’t have to. Just because one files, it doesn’t mean that the other has to. A married couple will have to decide before the case is filed whether or not they will file a joint case. While most of my married clients file jointly, not all do. There are pros and cons to each to consider.

Benefits of a Joint Bankruptcy Filing.

The cost is the same whether you file joint or single. If your spouse wants to file later, I will happily charge you and your spouse twice. Remember, once the case is filed, you can’t jump back in. A joint case is cheaper than separate cases.

It eliminates all individual and joint debt. If your spouse doesn’t file, they will be remain responsible for their individual and any joint debt. Since married couples are economic units, eliminating half the debt in the house probably isn’t the best fresh start it could be.

You only need to do the credit counseling courses once. A debtor must do a pre-petition credit counseling course before they file and a post-petition debtor education course to get their discharge. A married couple does the courses together which saves time and money.

It’s less paperwork. Whether you file jointly or singly, I will pretty much need the exact same things: Tax returns, bank accounts, deeds, etc. Even if your spouse doesn’t file, I will need their pay stubs and budget the household income and expenses.

If you are eligible for a Chapter 7, so is your spouse. The bankruptcy court reviews household income and expenses to determine whether you can file a Chapter 7 or a Chapter 13. If one spouse is eligible for a Chapter 7 based on household income, so is the other.

Disadvantages of a Joint Bankruptcy Filing.

One spouse owns too much non-exempt property. I recently had a case where both spouses wanted to file but the wife owned some land in northern Michigan. It had been in the family for a long time and was owned free and clear. If she filed, she would not have had enough exemptions to protect the real estate. The trustee would have administered the property for the benefit of the creditors. He filed. She didn’t.

Credit is damaged for both filers. Sometimes one spouse has little or no debt. Sure it would be nice to have bankruptcy wipe out the debt but if one spouses debts are manageable and not overwhelming, perhaps having one spouse with good credit is worth the trade off.

Divorce is on the horizon. Sometimes financial problems and divorce go hand in hand. If you are a married couple considering divorce, consider filing bankruptcy after the divorce if you are not a joint Chapter 7. You may both be a Chapter 7 after a divorce but a Chapter 13 while married. Even if both of you would be a Chapter 13 after a divorce, would you really want to be in a repayment plan with your ex-spouse? Probably not.

“J” also stands for:

Christopher McAvoy is a Taylor,  Michigan attorney and consumer bankruptcy lawyer who helps people in the  Downriver area  file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info.