Is it better for a married couple to file for bankruptcy jointly or to have only one spouse file?
When a married couple is considering filing for bankruptcy, they do have options in how they want to go about it. Because they are married, and may have joint assets, a couple can file for bankruptcy jointly. However, it is not required that a married individual files for bankruptcy in conjunction with their spouse. In some circumstances, it may benefit, or be less detrimental to the couple to have just one spouse file on their own. The following factors will help you determine how to file for bankruptcy in your unique situation.
Debt
When filing jointly, all debt from both individuals becomes part of the bankruptcy estate. A joint filing will discharge the most amount of debt as it will cover each individual’s separately held debt (accumulated prior to the marriage) as well as any debt the couple has acquired together within the marriage. It is important to know what types of debt are dischargeable to determine if both spouse’s debts are worth bringing into the bankruptcy. Read more about what types of debt cannot be discharged through bankruptcy.
For example:
If both individuals carry significant debt prior to the marriage, it would be wise to have it discharged all at once in a joint filing with one filing fee and one lawyer.
Property
Because Nevada is a community property state, like debt, all property acquired within the marriage is a joint asset between both spouses. (Read more about Community Property) If just one spouse files bankruptcy, all community property is taken into the bankruptcy estate, leaving the other spouses’ separate property (property owned before the marriage) separate. However, when filing jointly, Nevada State Law’s bankruptcy exemptions are applicable to both spouses, essentially doubling the threshold amount for property that you get to keep separate from the bankruptcy. Read more about Nevada Bankruptcy Exemptions.
For example:
If one spouse owned significant property prior the marriage, it may not be beneficial to bring that spouse into the bankruptcy and risk losing that otherwise separate property.
If you’re recently married and haven’t acquired much property or debt jointly, there is very little community property that will be taken into the bankruptcy estate from just one spouse filing.
If your home, for example, was purchased during the marriage, having the combination of both spouses’ bankruptcy exemptions could save the home.
Credit
Another factor to consider in deciding how to move forward with bankruptcy is one’s credit. Filing bankruptcy can cause significant damage to one’s credit score. In the case of filing jointly, both spouses will see a significant hit to their credit for as long as up to ten years. Read more about how Bankruptcy can affect your credit. If just one spouse files for bankruptcy, the other spouse’s good credit could help keep the couple moving forward when recovering from the bankruptcy. One spouse filing also leaves the option for the other spouse to file for bankruptcy, if needed, within the next 6-8 years whereas a joint filing prohibits the couple from filing again, either separately or jointly, within that time.
For example:
If one spouse has brought significant debt with them into a marriage, it may make sense for the individual to file bankruptcy alone as to not damage the other spouse’s credit. Even if debt was acquired by the other spouse within the marriage, it would become community property and thus discharged through one spouse’s filing.
As each bankruptcy filing is unique, and each family’s assets, debts, and priorities are unique, it’s important to discuss all options with an experienced bankruptcy attorney. To schedule a meeting to speak with the bankruptcy attorneys at LJ Law, contact us at (702) 998-1188, info@ljlawlv.com, or by scheduling a consultation online.
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