When filing bankruptcy, it's pretty common to have a married couple filed jointly. Many times, it's not in the best interest of the couple to file for bankruptcy jointly. That's why it's important to meet with a bankruptcy attorney when a couple is filing Chapter 7 bankruptcy. It is a dilemma that should be addressed on whether to file separately or jointly to best benefit the married couple. In a community property state all property that is acquired during the marriage and the debt that was incurred during the marriage belong to both spouses equally.
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There can be advantages and disadvantages to a couple filing for bankruptcy on which way they file. Typically, the reason that a couple would file alone is because when filing bankruptcy the filing spouse and the non-filing spouse both get the benefit of the automatic stay, even though the non-debtor spouse is not filing. The automatic stay stops all collection activity against the debtor. This includes a foreclosure, wage garnishments and lawsuits. The bankruptcy discharge should cover and protect both spouses. And a huge benefit allows the spouse who didn't file for bankruptcy, if necessary, to file Chapter 7 bankruptcy at a later time. This allows the couple the luxury of filing bankruptcy twice in less than eight years if necessary. Some people file singly to protect their spouses stellar credit. This is usually the case of an individual that had bad credit prior to getting married and doesn't want to drag down their spouse with them, especially after filing bankruptcy.
In most cases, both spouses filed for bankruptcy jointly. Depending on what state the married couple lives in, the exemption laws sometimes will give a more generous amount to a married couple then to a single. Some states will allow each of the spouses to get a homestead exemption because it being community property. This could possibly protect more equity in the family home. Many courts have ruled that community property is protected by the bankruptcy discharge. This means if a spouse files for bankruptcy separately, the creditor will be free to go after any separate property of the non-filing spouse to pay any community debts. There is also a gray area that has been brewing in regards to creditors going after a non-filing spouse after the bankruptcy is done. Another reason that most people end up filing bankruptcy jointly is the debtor will be required to use the income of their spouse to qualify even though this spouse is not filing.
When it comes to filing for bankruptcy, the decision should be made with much thought after discussing it with a bankruptcy attorney. When it involves a married couple, the bankruptcy attorney will decide which way will protect the maximum amount of property, with the least amount of damage. Every situation is completely different with some being more complicated than others.
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