Practical Bankruptcy: You May File a Chapter 7 Case without Your Spouse

Although you can file a “joint case” together with your spouse, you are not required to do so. And sometimes definitely shouldn’t.

 

Situations for Filing Bankruptcy without Your Spouse

The decision to file a bankruptcy case with your spouse and not just by yourself is often a very easy one. Most of the time you both need relief from creditors, usually because you are both legally obligated on the same debts. You both need to either discharge (legally write off) debts or to get more time to pay certain ones (such as recent income taxes) while being protected from those creditors.

But here are some situations in which you or your spouse should at least consider not filing a joint case with the other spouse:

  1. You have been married a relatively short time, so that only one of you is legally liable on all or most of the debts.
  2. Regardless how long you’ve been married, only one of you is legally liable for all or most of the debts, usually for some special reason, such as one of you having operated a business or being the only one who had qualified for credit.
  3. You and your spouse have very different debt situations, so that one of you may be better served by a Chapter 7 “straight bankruptcy” case while the other by a Chapter 13 “adjustment of debts” one.
  4. You and your spouse appear to need a Chapter 13 case, but because of strains in the marriage there are serious doubts that it would last the 3 to 5 years that such a case usually requires.
  5. You and your spouse are actively contemplating divorce and do not have the level of trust required to communicate honestly and comfortably about your finances

Example

Today’s example illustrates the first of these situations, with the others covered in upcoming blog posts.

James and Anita, both in their mid-30s, were married a year ago. It’s the first marriage for James, the second for Anita. Her former marriage ended leaving her with major debts, including on long past due credit card accounts, the balance left owing on a repossessed vehicle, and an unpaid second mortgage on a foreclosed home. James has little unsecured debt—only a credit card with a small balance—plus a vehicle loan that has always been and is now current.

James and Anita care about their future credit records, in particular for major joint credit purchases like a home and vehicles. They recognize that to improve Anita’s credit record in the future, she needs to discharge her debts now through bankruptcy—preferably with a Chapter 7 case for a much quicker discharge—and then affirmatively create a positive credit record going forward. They also recognize that James’ credit record would be significantly harmed if he was to file bankruptcy, and that he has no meaningful need to do so.

When James and Anita meet with a bankruptcy attorney they are advised that although they could file a joint bankruptcy case together, the best route is for Anita to file a Chapter 7 case by herself. Besides likely discharging all of her debts, this would likely enable her to start rebuilding her credit the fastest. Her bankruptcy filing would not harm James’ credit record—although he would be wise to take the precaution of checking his credit record after she files her bankruptcy case, and then periodically thereafter, to make sure.

Anita does file a Chapter 7 case, so that within 4 months she discharges all of the debts left over from her prior marriage. She receives some credit offers in the mail right after her case is completed, and she carefully selects one with which to start building a strong credit record. James monitors his credit reports regularly to verify that Anita’s bankruptcy filing does not appear on them.  Their combined credit record is greatly improved, positioning them for future important and responsible purchases.

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