Can One Spouse File Bankruptcy Alone?
While it is common for a husband and wife to file a joint bankruptcy, in some cases it may be beneficial for only one spouse to file. When one spouse files for bankruptcy protection, the other spouse is not automatically joined into the case. The husband and wife are treated separately and individually, although there are some consequences to the non-filing spouse, both positive and negative.
Filing separately can have several advantages to a husband and wife who have separate property and debts. It is especially appropriate when there is a large debt that only one spouse is liable to pay, and the parties are able to either protect their marital property through exemptions or by virtue of the non-filing spouse holding the property as non-joint property. Property in which the debtor has no ownership interest is generally not property of the debtor’s bankruptcy estate and beyond the reach of the bankruptcy court.
While the bankruptcy automatic stay will stop collection action against the debtor, this protection does not apply to protect a non-debtor. In a Chapter 7 case, a creditor may still collect on a joint debt from the non-filing spouse. In a Chapter 13 case, the bankruptcy code imposes a co-debtor stay that generally prohibits collection on joint debts during the bankruptcy.
Likewise, the discharge order at the end of the case will only apply to bankruptcy debtor. The discharge does not prevent collection on any joint debt from the non-filing spouse. Most joint debts are the result of a contract or the agreement of the husband and wife to pay a debt, however in some limited cases a statute or other circumstances may make both parties liable for a debt. If you have any questions concerning whether you or your spouse is liable for a debt, consult with your attorney.
Property may be protected through state or federal law exemptions, or the property may be excluded from the bankruptcy estate when the bankruptcy debtor has no ownership interest. Property that is held jointly and cannot be protected by exemption laws may be at risk for turn-over to pay creditors in a Chapter 7 case.
The decision to file bankruptcy for one or both spouses can require a complex analysis of the separate and joint property and debts of each spouse. Every case is different and while some cases gain a benefit from filing jointly, other cases receive a greater benefit from a separate bankruptcy. If you are in a situation where a separate bankruptcy filing may benefit your family, consult with an experienced bankruptcy attorney and discuss your options. The federal bankruptcy laws offer many choices for individuals needing debt relief and your attorney can help you decide the best financial decision for your family.
Devising A Financial Strategy After Divorce
One of the most common causes of divorce is financial difficulties. Once your divorce is over your finances may get worse before they get better. What can you do to lessen the impact?
Calculate your net worth by taking inventory of your assets and liabilities. Summarize all of your assets including the value of your home, cash, savings or checking accounts, any valuables such as jewelry, antiques or artwork and any retirement accounts. Subtract the amount that you owe on all of your debts. Be sure to include payments that are made quarterly or yearly.
Prepare a budget based on your new income level and stick to it. Look at your income and liabilities. Be sure to budget for car repairs and other unexpected expenses. If the amount you spend is more than your income, you will need to make some choices about expenses you can cut. You may need to take your lunch to work, or cut back on activities for yourself and your children.
Make certain that joint accounts with your ex-spouse are closed. You do not want to be held responsible for debt that your ex agreed to pay in your settlement. Be sure to check the mortgage, automobiles, insurance and credit cards. Take the appropriate steps to transfer titles if needed. Be sure that any joint checking or savings accounts are closed. Establish new accounts and credit if you haven’t already done so.
Update your beneficiary on your life insurance, investments and retirement plans. Remember to update your will and any trusts. If your ex-spouse covered you on their health insurance, get your own policy or make sure you are covered by COBRA benefits.
Try to keep emotions out of your financial decisions and don’t dwell on the split from your spouse. It is up to you to take care of yourself in all aspects of your life, including your money.