Can just one spouse file for bankruptcy?
I often meet with married couples and I’m often asked, “Are we both required to file for bankruptcy?” The answer to that question depends on several variables and so I usually say, “It depends.”
If both spouses have significant debt either jointly or individually, then it usually makes for both spouses to file bankruptcy jointly.
If all, or a significant percentage of, the debt is in the name of only one spouse, it might make sense for only that spouse to file for bankruptcy. This would be especially true if the non-filing spouse owns individually a significant asset that would end up being non-exempt in the bankruptcy.
If the spouses jointly own a significant asset with non-exempt equity and only one spouse has debt it would make sense for that spouse to file bankruptcy individually, because it could result in less of the equity in the non-exempt asset being available to creditors in the bankruptcy.
If the combined gross household income is over the Means Test threshold it might make sense for only one spouse to file bankruptcy because the Means Test would then be based on the gross income of the filing spouse and the net income of the non-filing spouse. This would be especially true if the non-filing spouse doesn’t have much debt in his/her name and/or has significant gross income but also has substantial payroll deductions (taxes, child support, insurance, retirement, etc.).
Albeit rare, there are even situations where one spouse files a chapter 7 bankruptcy, while the other spouse files a chapter 13 bankruptcy.
If you aren’t sure if it makes sense for both you and your spouse to file bankruptcy, please meet with an attorney to find out what your options are.
