A common question that many clients ask during our firm’s free consultations is whether their marital spouse is required to file for bankruptcy with them. Luckily, bankruptcy law permits one spouse to file for bankruptcy without the other spouse joining the process. In fact, you don’t need your spouse’s consent to file for bankruptcy.
In many instances, it’s in the marital couple’s best interest that only one spouse file. For example, if one spouse has all the debt, but all of the assets are in the name of the other marital spouse then the couple would be able to keep the assets, while also discharging the insurmountable debt.
Additionally, the assets individually owned by the non-filing spouse do not have to be listed on the filing spouse’s petition. However, if the assets are jointly owned and only one marital spouse files for bankruptcy, then the filing spouse’s interest in the joint asset is part of the bankruptcy estate (usually 50% of the value of the asset).
In re Becker, 136 B.R. 113, 115 (Bkrtcy.D.N.J.,1992) (“The debtor’s interest in property which is joint owned with a nondebtor spouse therefore becomes property of the bankruptcy estate upon the filing of a bankruptcy petition”).
Unfortunately, where only one marital spouse files for bankruptcy, the income of the non-filing spouse must be included on the bankruptcy petition, unless the marital couple is living separate and apart.
In re Carter, 205 B.R. 733, 735 (Bkrtcy.E.D.Pa.,1996) (“To apply these provisions to a married debtor who filed individually, court base their calculation of the debtor’s disposable income on the debtor’s family, including the income and expenses of the nondebtor spouse. Consideration of the nondebtor spouse’s income is seen as necessary because a portion of that spouse’s income is likely to be applied to the basic needs of the debtor, potentially increasing the share of the debtor’s own income that is not reasonably necessary for support”).
Bankruptcy law requires that the household income be included in the bankruptcy petition, whether a client files for Chapter 7 or Chapter 13. Id. (“This view recognizes the reality that married couples live as a unit, pooling their income and expenses”). Sometimes, the additional income of the non-filing spouse will affect the debtor’s eligibility for filing Chapter 7 and affect how much the debtor must pay to creditors in Chapter 13.
It should also be noted, that if the marital couple has joint debt, the non-filing marital spouse will remain fully liable for the joint debt, while the filing spouse is discharged from the same debt. Even if the filing spouse is the primary debtor on the loan and the non-filing spouse only co-obligor, the creditor may still hold the non-filing spouse liable for the entire amount of the debt.
If you have any additional questions regarding bankruptcy, please call our firm for a free consultation.