Once you’ve decided that filing for bankruptcy would be the best option for your situation, a question comes up that you might not have thought about before—should you file individually or with your spouse? Married couples are allowed to file for bankrupt with one petition. This is called a joint bankruptcy. Filing for bankruptcy jointly means that your combined property and debts as a couple are all part of the bankruptcy.
Below, we’ll go over a few of the ins and outs of filing for bankruptcy as a married couple.
Should You File Jointly or Individually?
The first question you need to answer before you file a joint bankruptcy petition is should you do so? A few questions to keep in mind when deciding whether to file individual or jointly include:
What kind of debt are you trying to discharge?
Through a joint bankruptcy, you can wipe out all of the dischargeable debts that you and your spouse owe together as a couple. However, if only one spouse files bankruptcy, the non-filing spouse is still on the hook for his or her own debts as well as any joint debts. So if you have a lot of joint debts, filing a joint bankruptcy is usually a better option than filing individually. On the other hand, if you have very low or no debt and your spouse has many individual debts, then it may not be in your best interest to file a joint bankruptcy. In that case, your spouse can file alone to wipe out his or her own debts. This way you, the non-filing spouse, have the option to file bankruptcy later on if you really need it.
If you live in a community property state (including Nevada), these rules are a bit different.
In community property states, community debts are discharged with respect to any community property, even if only one spouse files for bankruptcy. See below for more on what property is considered “community property” and what property is considered “separate property.”
How much property do you own?
When you file a joint bankruptcy petition, both you and your spouse’s assets are included in the bankruptcy. The decision to file a joint bankruptcy with your spouse also depends on whether you have enough exemptions to protect all of your property. If you live in a state that allows married couples filing jointly to double exemptions, for example, you may be able to hang on to more of your property. If you file an individual bankruptcy without your spouse, his or her separate property is not part of your bankruptcy. So if your spouse has a significant amount of nonexempt separate property, your best option may be to file without your spouse in order to protect his or her assets.
Costs associated with bankruptcy
Filing for bankruptcy usually involves paying a filing fee to the court and paying for your attorney, if you decide to hire one. By filing a joint bankruptcy with your spouse, you will be able to save a substantial amount of money over filing two individual bankruptcies.
Effect on your credit
If you file a joint bankruptcy, it will be reflected on both of your credit reports. Even though bankruptcy has a negative effect on your credit initially, most people’s credit scores tend to increase shortly after the bankruptcy. However, if you have good credit and your spouse needs to file bankruptcy primarily for his or her own debts, then it may not be in your best interest to file jointly and take the hit to your credit.
Separate Property vs. Community Property
One of the most important considerations to take into account when deciding whether to file for bankruptcy individually or jointly is how your marital assets and debts will be affected by the bankruptcy. When you get married, you agree to share your property with your spouse. However, you do not necessarily share all of your property—the courts split marital property into separate property (your own property) and community property (property you own with your spouse).
A few examples of community property include:
- Money either spouse earns during the marriage
- Things bought with money either spouse earns during the marriage
- Separate property that has become so mixed with community that it can’t be identified
- Separate property includes:
- Property owned by either spouse before the marriage
- Property given to just one spouse
- Property inherited by just one spouse
When you file for bankruptcy as an individual in a community property state, all community property is part of your bankruptcy even if you file without your spouse. Before filing, make sure that you have enough exemptions to protect all community property. If you cannot exempt all community property by yourself and you are allowed to double your exemptions in a joint filing, it may be better to file with your spouse.
Filing a Joint Bankruptcy Petition
Once you have decided that filing for joint bankruptcy is the right move, you and your spouse will file a single set of bankruptcy papers with the court, in which you disclose all property, debt, income, and expenses you have between both you and your spouse. In most cases, bankruptcy filing fees are the same whether you file an individual or a joint bankruptcy. Thus, if both you and your spouse intend to file, you will save money on filing fees with a joint bankruptcy.
Get Help from a Nevada Bankruptcy Attorney
You don’t have to decide whether to file individually or jointly on your own. If you have questions about the bankruptcy process and how it will affect your spouse, contacting a bankruptcy attorney would be a good way to make healthy, informed decisions about your bankruptcy. Contact the Law Office of Erik Severino today at 702-997-4149 to schedule a free consultation.