Filing Bankruptcy As A Couple

Overwhelming debts and the decision to file for bankruptcy can take a lot out of a family.  As a married couple, filing together or separate can provide different risks and benefits. Things can get more complicated if a couple is filing for bankruptcy in divorce.

Important Aspects To Know

First, there is no law that says a couple is required to file together. Couples are free to file either together or separately according to bankruptcy laws. However, depending on the types of debts held, filing separately could be better in the long run. As a general rule, only the spouse holding the bulk of the debt liability should file for bankruptcy and leave the other spouse out of the filing whenever possible.

The reason is that filing together on a debt that is individually held, or was accumulated prior to marriage, could result in damage to the non-liable spouse’s credit history. Filing separately on individually held debts separates the liability from the non-filing spouse.  However, jointly held debts are a different ballgame altogether.

If the bulk of the debts are jointly held, or accumulated together in  marriage on shared accounts, filing together may be more beneficial. This is because filing separately on jointly held debts leaves the non-filing spouse solely liable for the debt in the eyes of creditors, leaving them subject to collection efforts and common asset seizure. In other words, only the filing spouse is granted bankruptcy protection on shared debts when filing separately.