Does the law require married couples to file bankruptcy together?
No, the United States Bankruptcy laws do not require married couples to file together, although in most of the cases I file, both spouses choose to file together. In other cases, especially with recent newlyweds, only one spouse files thereby preserving the credit standing of the other, non-filing spouse. It is important to mention that the law requires that all household income must be included in the “means test” calculations when determining whether a debtor is eligible for a Chapter 7 bankruptcy case or if a Chapter 13 should be filed. The bankruptcy code mandates that total household income must be included in the calculations however expenses for non-filing household members can also be deducted from the calculations. The bankruptcy means test is very complicated. My office will perform a full means test calculation at your initial consultation.
Do I have to be legally married to file jointly?
Yes, you have to be legally married to the other person filing the joint bankruptcy with you. Believe it or not, I actually filed a case for a couple who considered themselves married and told me at the pre-filing consultations in my office that they were married for a number of years. At the hearing, the bankruptcy trustee asked the question, “are you two married to each other?” where upon they hesitated and stated that while they are technically not married, they consider themselves married, call each other husband and wife and have done so for years, so they are married for all intents and purposes. At the hearing, they told the trustee that they have a common law marriage. Unfortunately, this is not good enough for the federal government when it comes to filing a joint bankruptcy petition and, Michigan does not recognize common law marriage. We had to bifurcate or split the cases into two separate individual cases, pay the extra filing fee and have additional court hearings. The cases ended up both proceeding to a successful discharge and my clients were happy. I only wish that they would have told me that they were not “technically” married at the office meeting. It is important to note that because the bankruptcy code is a Federal or United States law, legally married same sex couples can file a joint petition so long as they are legally married in any state, even if the state they are filing the bankruptcy in does not yet recognize same sex marriage. This is due to the U. S. Supreme Court decision in United States v. Windsor, in which it struck down section three of the Defense of Marriage Act, which had denied federal benefits same sex couples who were legally married, finding that section unconstitutional.
I am married and wish to file bankruptcy by myself. Will my filing negatively affect my spouse’s credit?
If you are married, you have the option of filing bankruptcy either individually or jointly with your spouse. When you file individually, only your name and social security number are used on the official bankruptcy petition, so your non-filing spouse’s credit report should contain no mention of the bankruptcy, since they are not filing. Of the clients I see that are married yet filing an individual case, most of the debt they have is not joint with their non-filing spouse, but is in their name alone. When I evaluate a client who is married and see that much of the debt they are seeking to discharge happens to be joint debt with their spouse, I would counsel them to file jointly. Fortunately this is rare and in most married couples I see, each spouse has their own debt with the exception of perhaps the marital home for which the mortgage and underlying promissory note is often jointly held. Some of my clients mistakenly assume that when they file a bankruptcy petition that their discharge eliminates the entire debt, even for any co-signers that might also be liable for the account. A common assumption is that bankruptcy is a government program and that when the bankruptcy is filed, this government entity steps in and pays the debt. This is not true. A bankruptcy discharge prohibits creditors from attempting to collect a debt for the person who was granted the discharge. When filing Chapter 7, joint debtor’s or co-signers are still fair game for the creditors to pursue, so if you are filing individually, your spouse will remain on the hook, in a Chapter 13, the automatic stay protects your co-signers due to the fact that your are proposing a repayment plan and the law wants to protect you from the threat of a creditor hounding your co-signer and thereby exercising indirect collection pressure.
What are the benefits of filing bankruptcy as a married couple?
The primary benefit of filing a joint case is cost savings and consolidated court hearings. Presently, the US Bankruptcy court filing fee is $310 for a Chapter 13 and $335 for a Chapter 7. When you file a joint case, the bankruptcy court only charges one filing fee and each spouses case is essentially consolidated into one case for purposes of administration. So you are basically getting a two for one deal. The same is true for my legal fees. In a typical consumer bankruptcy case, I charge the same fee for a married couple as for an individual case, so again, there is a cost savings. In a joint filing, both couples attend their court hearings at the same time as it is considered one consolidated case. An additional benefit that stems from a joint bankruptcy filing is in cases in which one spouse has co-signed for the other or there are other joint debts. An individual filing by one spouse would leave the other non-filing spouse open to collection efforts by the creditor. Note that the bankruptcy filing by the one spouse did not trigger any collection rights in the creditor as those rights were always there. My office will generally recommend a joint filing in cases in which a potential joint debt or co-signed debt is significant and might be burdensome for the non-filing spouse to repay outside of bankruptcy. If a bankruptcy discharge will help the household, I will normally counsel the couple to consider a joint filing. Despite what the banking and credit industry would like you to believe, there are in reality very few negative aspects to the filing of a bankruptcy so long as the case was filed after a thorough evaluation by a qualified bankruptcy attorney. My office takes great care to advise you how bankruptcy may affect any of your own personal assets or those assets that you might hold jointly with your spouse such as real estate, bank accounts or vehicles. I will also inquire if any transfer of real or personal property occurred within certain time periods and what impact that might have on a potential bankruptcy.
Will it affect my spouse’s credit?
Your spouses credit should not be affected by your having filed bankruptcy unless they co-signed, making themselves personally liable as well. If you are in doubt as to whether or not your spouse is a co-maker on the account, checking each of your credit reports should tell you. Generally, a joint account will show up as a joint account on the credit report whereas an individual account will show as such. If you are still in doubt after checking your credit reports, a phone call or email inquiry to the creditor asking to see the original credit application should tell you. Keep in mind that if your spouse or child is an authorized user or cardholder on the account, they are not jointly liable. They are simply allowed to use the card and therefore, if you file a bankruptcy, they cannot be held liable for the debt as they are simply an authorized user. Do not let aggressive collection agents convince you that your non-filing spouse is liable for a debt if they cannot prove that they actually signed the credit application or other document putting them on the hook.
Are you married and considering filing a personal bankruptcy?
Contact Attorney Walter Metzen at 313-962-4656. I am a board certified specialist in consumer bankruptcy law. I focus my practice on helping individuals and married couples with consumer debt. I offer free bankruptcy consultations and will thoroughly evaluate your particular case and provide you with the options to make an informed decision as to how to handle your particular financial circumstances. Call 800-398-DEBT or contact us online to schedule a free consultation to meet with a bankruptcy lawyer and get answers to your questions specifically tailored to your specific financial concerns.