As a Bakersfield and Temecula bankruptcy attorney I sometimes meet with prospective married clients who seek to file Chapter 7 bankruptcy individually. Initially I have to bring to their attention that despite their request to file on their own, their spouse’s income has to be taken into consideration to determine their ability to file both under the means test which has been discussed in prior posts on this blog as well their joint income compared to their joint expenses.
Assuming the non-filing spouse’s income does not pose a roadblock to filing a Chapter 7 bankruptcy, the next issue I address with these clients is the advisability of filing jointly with their spouse instead of individually. The whole idea of the fresh start from a Chapter 7 filing is defeated if only one spouse files and receives a discharge of their debts, but the other spouse is still left with his or her own burdensome debt that could have been discharged in a joint filing. In these cases there is usually an initial reluctance on the part of the spouse who wants to avoid filing bankruptcy which requires my meeting with them and stressing the advantages of filing jointly to remove all of the family debts-not just their spouse’s. The fees and costs are almost always the same for filing together so that should not pose a barrier to a joint filing.
Each situation is unique and in some cases where it may be advisable for the benefit of both spouses to file jointly, one spouse may just be philosophically or emotionally opposed to filing bankruptcy. In such cases, I do my best to convince the reluctant spouse that their family will truly benefit from the Chapter 7 filing by filing jointly. Once I explain why it is generally a good idea for spouses to file jointly, the spouses can see why it’s to their advantage and agree to file jointly.
In cases where it’s not advisable to file together (or one spouse still wants to proceed on his or her own) they can as long the other spouse is willing to cooperate to the extent of providing the necessary income and expense information for their spouse’s Chapter 7 filing. The non-filing spouse will also usually need to sign a “Spousal Waiver” where he or she agrees that should he/she file an individual bankruptcy case later then he/she must use the same exemption scheme as the previously-filing spouse.
There are occasionally situations where it does make sense for only one spouse to file.
One common situation is a recently married couple where one spouse has accumulated debt prior to their marriage, but the other spouse is in relatively good financial shape and their combined income still allows for a Chapter 7 filing by the one spouse. This allows the non-filing spouse to preserve their good credit. It also makes even more sense for the spouse with the problem debt to file Chapter 7 before getting married, especially in cases where there may be a means test issue due to the prospective spouse’s income once they are married.
Another fact scenario where it is advisable for only one spouse to file Chapter 7 is where the other spouse may possess non-exempt assets (and these assets are not part of the overall bankruptcy estate) that would be taken or sold for the benefit of creditors if they file jointly.
There also may be situations where delaying one spouse’s Chapter 7 filing to allow for a joint filing is advisable. One example of this situation is where one spouse may have tax debt that will become dischargeable if the filing is delayed. Another example is where one spouse may have made a preferential transfer payment for a debt due to a relative within the past year. When the appropriate time has expired to allow both spouses with problem debt to file it definitely makes sense to do so.
Again, as stated above, each situation is unique based on the particular facts involved and stresses the need for any spouse considering filing bankruptcy to meet with an experienced bankruptcy attorney to determine how and when to file.
How Bakersfield and Temecula Bankruptcy Lawyer Scott Bell can help
If you have found yourself in unmanageable debt, but are still hesitant to file for bankruptcy, come discuss it with us with a free consultation. You can reach us at (661) 243-1737 or (951) 296-6775. You can also speak with us directly through the Live Chat feature of our website.
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