Bankruptcy rules do not require spouses to choose the same options when filing for bankruptcy protection. A spouse may choose to file jointly, separately or not at all. Since Chapter 7 and Chapter 13 bankruptcies address personal assets and discharge of indebtedness differently and have different eligibility requirements, it might be in each spouse's best interest to file under separate bankruptcy provisions.
Chapter 7 Bankruptcy
Under Chapter 7 bankruptcy, property that is not exempt from liquidation by the court is forfeited to a court-appointed trustee who sells the assets and gives the money to your creditors. If your spouse files for Chapter 7 bankruptcy, all nonexempt property that is solely owned by your spouse or jointly owned in the marriage might be subject to liquidation regardless of whether the nonfiling spouse petitions for bankruptcy. To qualify for Chapter 7 bankruptcy, the petitioner's income must satisfy a means test demonstrating that her income is below her state's average median income for a family of the same size.
Chapter 13
If your spouse is unable to qualify for Chapter 7 bankruptcy because of too much income, she is still eligible to file for Chapter 13 bankruptcy. Under Chapter 13, your spouse commits to a repayment plan for a period of three to five years. At the conclusion of the repayment period, any excess eligible debt in your spouse's name is discharged.
Read More: Chapter 13 Bankruptcy Explained
Joint Debt
If debt is jointly in both your names, a discharge of debt due to your spouse's bankruptcy will not relieve you of your payment obligations. Therefore, if your spouse receives a discharge of joint debt under Chapter 7 bankruptcy, you might still be required to pay part of the debt to the creditor under your Chapter 13 repayment plan.
Separate Petitions
Spouses might be required to separately file for bankruptcy under different chapters due to the particular filing rules of each type of debt relief structure. Since Chapter 7 imposes a restriction on the income level of the petitioner, both spouses might not be eligible to file for this form of liquidation bankruptcy. Additionally, if one spouse has recently received a discharge under either Chapter 7 or Chapter 13, he might be precluded from filing under the same bankruptcy chapter for a prescribed number of years.
References
- United States Courts: Chapter 7
- United States Courts: Chapter 13
- Fabricus Law Bankruptcy: Filing Bankruptcy Without Your Spouse
- Florida Bankruptcy Services: Can One Spouse File Bankruptcy
- Moran Law Group: How is My Spouse Affected if I File Bankruptcy Alone?
- The BK Blog: Can I File Bankruptcy Without Involving My Spouse?
Writer Bio
Kevin Owen has been a professional writer since 2005. He served as an editor for the American Bar Association's "Administrative Law Review." Owen is an employment litigator in the Washington D.C. metropolitan area and practices before various state and federal trial and appellate courts. He earned his Juris Doctor from American University.