Bankruptcy Options for a Married Couple After a Loss of Income

Filing for bankruptcy as a single person or as a married couple varies depending on specific bankruptcy laws within in each state. In most states there is an assumption of community property for married couples, regardless of the specific names on deeds, titles or credit. This may mean that despite the fact that only one individual in the marriage wants to file for bankruptcy, it may be the best option for both to file.

Bankruptcy Protection

When both individuals have their names on any deed, title, credit card or other type of debt either can file bankruptcy. However, the bankruptcy protection may only apply to the individual that files. This means that creditors may still choose to go after the other spouse or partner for any outstanding debts. It can also cause issues with exemptions to the bankruptcy filing, particularly if businesses and investment properties are included in the bankruptcy case. Typically in most states that have community property, filing for bankruptcy by one spouse will still provide protection to the marital property which may include the family home and other specific types of exemptions.

Bankruptcy After Loss of Income

For most couples if the main income earner loses his or her income, completing payments on the mortgage, credit cards, other liabilities and loans is going to be incredibly difficult. Even if the other spouse works full time staying current can be impossible. Filing for bankruptcy can occur as soon as the couple or individual meets the means tests for Chapter 7bankruptcy is important, but there may be options for filing for Chapter 13 bankruptcy. Keep in mind that it isn't necessary to wait until you are significantly in arrears or the creditors are filing lawsuits and taking action.

Filing Joint or Individual – Legal Advice is the First Step

Since there is a difference between the type of bankruptcy filed and the pros and cons for filing jointly or as an individual, talking to an attorney is important. The attorney will consider how the assets and debts are divided between the married couple and then provide information on how the different types of bankruptcy may impact on current and future financial standings.

In addition the attorney can provide information on how to protect yours assets going through a bankruptcy, regardless of how you choose to file. Talking to an attorney in advance will provide you with the knowledge that you need to make the best decision for both yourself and your spouse.