Does My Spouse Have to File Bankruptcy with Me?

Can I File Bankruptcy in San Jose without my Spouse?The short answer is: No. Spouses do not necessarily have to file bankruptcy together. I’ve represented scores of Bay Area bankruptcy clients over the years where only one spouse has chosen to file personal bankruptcy. However, there are a number of important caveats that we as bankruptcy attorneys must discuss with any married debtor considering filing bankruptcy without his or her spouse. Additionally, if the idea is to avoid disclosure of a non-filing spouse’s high income, forget it. All married bankruptcy petitioners must disclose their spouse’s income as well, and household income, not just that of the spouse filing bankruptcy, is used to determine his eligibility for Chapter 7 or Chapter 13 bankruptcy.

At the outset the bankruptcy lawyer must establish whether both spouses are jointly liable for their debts. For example, if the marriage is a relatively new one, and one spouse came to the marriage with his own large credit card balances and poor credit, and this is the spouse considering filing bankruptcy, then it may make a good deal of sense for only that spouse to file. One spouse’s bankruptcy will not harm the credit of the other, non-filing spouse. But if the credit cards or other loans involved are joint accounts, then a bankruptcy discharge for only one of these co-debtor spouses will provide no real debt relief at all to the couple since that creditor can still collect from the non-filing spouse.

One exception to the above is the co-debtor stay provided in Chapter 13, which protects individual co-debtors of the person filing Chapter 13 bankruptcy from collection activities  for the duration of the Chapter 13 case unless relief from the Automatic Stay is granted by the Bankruptcy Court as to the co-debtor. Importantly, the Chapter 13 co-debtor stay applies only to consumer debts, not those incurred from the operation of a business, from taxes, or from tort liability. Additionally, the co-debtor, who may be a spouse of the Chapter 13 debtor or any other family member or friend who co-signed on a debt, ultimately only receives protection from collection activities to the extent that the Chapter 13 payment plan provides for the full payment of that debt. If the debt for which the co-debtor is liable is an unsecured debt for which the Chapter 13 plan will satisfy only 50%, for example, the upon the Chapter 13 debtor’s discharge, the creditor can still collect the remaining balance of the debt from the co-debtor who did not file bankruptcy. There is no co-debtor stay in Chapter 7 bankruptcy. A non-filing spouse receives no protection at all from her spouse’s bankruptcy if she is jointly liable for the same debts.

There are situations, of course, in which a bankruptcy debtor may not care whether her spouse continues to be liable for joint debts despite her bankruptcy discharge. If the spouses are separated and a divorce is pending or imminent, then the spouse filing bankruptcy may only be concerned about obtaining a bankruptcy discharge for herself. I can certainly understand this sentiment and have filed a number of Chapter 7 bankruptcy cases in precisely this situation.

Ultimately, the question of whether one spouse should file bankruptcy without the other depends on the particular facts of the case, and an experienced bankruptcy attorney will carefully review the spouses’ liability for joint debts, both spouses’ incomes and assets, and the feasibility of a Chapter 13 bankruptcy, among other factors. Always seek the advice of an experienced California bankruptcy attorney, and don’t try to go it alone!

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