A common question I get asked from married couples regarding bankruptcy, is if they have to file jointly or if it's possible for one spouse to file bankruptcy alone? Also, which way of filing is best? Married couples may file bankruptcy together if they wish to but it is not compulsory and many people don't realize this.But what are the ramifications of filing bankruptcy alone as opposed to filing jointly with your spouse?
Many people don't realize that if you’re married and you want to file jointly for bankruptcy, then that's okay but it is not written anywhere that you must file together. In other words, there is no requirement under bankruptcy laws to file together.
Generally speaking, there are two kinds of bankruptcies that people may choose to file, and those are a Chapter 13 or a Chapter 7 bankruptcy. Chapter 7 is the most common form of filing bankruptcy and usually results in the liquidation of a debtor’s assets to wipe out debt and is considered to be the quickest way to file, not to mention the easiest.
When a Chapter 7 is filed by just one spouse, they need to be very careful as to which property is property of the bankruptcy estate. What defines a bankruptcy estate? It is the property and assets in the estate that determine what might be available to pay creditors. Additionally, there is a broad definition of property under Bankruptcy Code 11, as property is all legal or equitable interests of the debtor in addition to any property that is community property of the spouse and debtor.
There is also exempt property, which is not subject to liquidation as outlined by federal or state law, and it is considered to be the property of the estate, that is until the exemption claims are final. Usually your personal possessions and the home you live in are considered to be exempt. The exemption claims are usually finalized about a month after the 341 meeting of the creditors.
It's important not to confuse community property in the area of bankruptcy law with community property in divorce law. An example of this may be an individual who has title to a vehicle, and it might be considered community property during a divorce. However, in a bankruptcy proceeding, it may be viewed as non-estate property if it belongs to the spouse who isn't filing.
There are many things to consider and various ins and outs when it comes to what you can and can’t do, and what you may and may not keep. It’s not easy to figure that out on your own without making a costly mistake. This is why it's particularly important to make sure that you have the guidance of an experienced bankruptcy attorney to help you work of a plan of action and make sure that you understand the consequences of any decisions you make regarding the best way to file bankruptcy.
Bankruptcy law is not an easy area of the law to understand, and if a person choosing to file on their own makes a mistake, they could possibly be charged with fraud. So its important to get things right and go through the correct process in an orderly fashion with a full understanding of the laws involved. Bankruptcy is complex and with one mistake, that whole house of cards can come tumbling down.
As a bankruptcy attorney it's my job to help you get through the process with as little hassle as possible. I want to make sure that all your questions are answered and you have full understanding of the various implications of filing bankruptcy. I offer a free 30 minute telephone consultation where we can discuss your situation and work out if filing bankruptcy is the best option for you.