If you and your spouse are facing large amounts of debt and can't seem to get a hold of your finances, bankruptcy might be the best decision. There are a couple of different ways you can file when married, and it's important to understand your options to make the best decision for the both of you.

Factors To Consider

When thinking about bankruptcy, there are many legal and personal factors that you should consider.

As a married couple, it is essential to understand how much property you own separately and together, along with the value. You will also need to calculate how much all your overdue bills are and your combined income. It is a good idea to review your credit reports and scores as well.

After considering all personal information, you will want to look into your state's laws. Each state has different bankruptcy filing regulations, especially for a married couple. Understanding your state's laws will help you make the right decisions.

The next step will be to decide if you want to file jointly or individually. This is a big decision and will have a significant impact on our overall case and outcome.

Joint Petitions

Joint petitions are very popular among couples looking to file for bankruptcy. The process is usually less expensive and more efficient than filing individually. A joint petition will take into consideration individual income, assets, debt, and credit scores, along with all marital income, assets, and property.

While joint bankruptcy may seem like a perfect way out of a married couple's financial woes, it isn't always the best choice, as this process has its pros and cons.

Pros

One of the best advantages of this filing is reduced cost and time. You'll be paying one bankruptcy fee and one attorney charge for two people, essentially cutting the price in half. Joint filing is more efficient and convenient as well, thanks to a single set of documents and paperwork.

Cons

This filing will equally affect each person's credit score. So, if someone started with a higher score and now bears the other's debt, their report will be hurt. Jointly filing is also unable to gain certain asset exemptions.

Individual Petitions

Married couples can file separately, meaning the petitions will be individual, or just one spouse will pursue the case. If you separately file, all your individual and shared marital property will still be part of a bankruptcy estate, meaning that it will be up for liquidation.

Individual filing doesn't include your non-filing spouse's personal property, making it a perfect option when the non-filing spouse has significant assets to cover. However, it can be challenging, especially when you must include each spouse's income in your bankruptcy. There are many factors to consider before filing individually.

Pros

Filing separately will eliminate most of the filer's unsecured debt and can help protect more assets. The non-filing partner will not be affected, and their credit ratings will remain intact.

Cons

Filing individually will most likely result in increased attorney fees and court costs. Your spouse can also affect your eligibility under Chapter 7 if they have a higher income. Although your partner is not involved in filing, creditors may come after their wages and assets.

Marital Adjustment

Marital adjustment allows you to separate some expenses from your non-filing spouse's income, reducing your combined amount and helping you qualify for bankruptcy. This is only available to use when filing individually. You can deduct a few things under marital adjustment, including child support expenses, investment accounts, home insurance, and more.

Conclusion

Filing for bankruptcy is a big decision, especially when it affects your spouse and family. The two options for married couples, filing jointly or separately, each have their own set of pros and cons. Every situation is unique, so it's essential to understand the process before making a decision so you can be on the path to financial prosperity.