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You may be surprised to learn that you and your spouse don’t have to file bankruptcy together. You can file two separate bankruptcy cases if you want to. You can file while your spouse stays out of the bankruptcy process altogether.
Deciding which of these options is most advantageous means asking a few questions.
What’s the household debt load?
Since both of your debts impact the household budget keeping one spouse out of bankruptcy may not make much sense. You might really need the relief of wiping out every eligible debt to save your home, car, and sanity.
This is especially true if you’re filing for Chapter 13, as you’ll still make payments on a Chapter 13 plan. While the Chapter 13 plan does come with a marital adjustment deduction that can reduce the amount of money you pay into the plan, you’ll still have to run the numbers to see if that move makes sense.
How many joint debts do you hold?
If you have joint debts then you also want to go ahead and file together. Because if you don’t, you’ll gain the protection of the automatic stay, but your spouse won’t.
The creditors will continue coming after your spouse. And if they’re the type of creditors that might issue a lawsuit or put a lien on your property, you could still end up losing assets.
You could face problems even if these bills aren’t so intense. The endless badgering of your average collection agent isn’t much fun for anyone.
Keep in mind that the specific “names on the debt” don’t matter here. Missouri is a community property state. This means any debts you incurred after your marriage date are jointly held between you and your spouse.
Who owns your assets?
If your spouse owned some of the property you want to protect before the marriage then filing separately might be advantageous. Your spouse’s property won’t be in danger anyway, and that will leave you free to file for Chapter 7 bankruptcy.
You do want to double check with an attorney before you just decide to go ahead and take that route though. In some cases, your home could still be at risk.
Can you pass the means test?
Both your income and your spouse’s income are used in Chapter 7 means test calculations. If you’re not going to pass the means test you’re going to end up with a Chapter 13 bankruptcy.
This means it will usually make more sense to file together so you can eliminate more debt.
Not sure what to do?
Bankruptcy is a complex and difficult legal matter that nobody should try to tackle on their own. If you’re not sure what to do, contact