Should Your Spouse File Bankruptcy with You

Married couples are not both required to file bankruptcy when one spouse elects to file. In fact, there may be distinct advantages to filing separately. However, there are enough moving parts to this equation that both partners should have input from counsel. 

On the positive side of the ledger, one spouse may choose not to file because the debts were incurred by the filing spouse prior to marriage such that the non-filing spouse has little or no liability for the debts seeking to be discharged. Additionally, if the non-filing spouse does not have liability for any joint or community debts, and this is reflected in their credit reports, then the non-filing spouse’s credit should not be affected by the filing spouse’s bankruptcy. Of course, you would need to monitor your credit score to ensure this. Other advantages may arise depending on the laws of the state in which you file, and the type of assets owned by each spouse.
By far, the biggest disadvantage to a non-filing spouse includes the fact that he/she is not discharged from any joint or community debts. Under this scenario, the creditor simply looks to the other spouse for payment. Other potential disadvantages include the possibility that the non-filing spouse may have to end up filing for bankruptcy anyway, thus doubling the costs and fees, and you may get closer scrutiny by the bankruptcy trustees if it appears that you are trying to manipulate the system. If the couple is seeking a divorce, the bankruptcy will likely slow those proceedings down, and will have an impact on the assignment of liabilities and the distribution of assets when the marriage is dissolved.

Finally, If you do decide to file without your spouse, keep in mind that much of the non-filing spouse’s information may still be relevant, and even required, such as his/her separate income/expense information, and information about his/her separate assets.