Redwood City Bankruptcy: Filing Separate from your Spouse

Can only one spouse file for bankruptcy or do married people have to file together? The short answer is that, yes, the law allows one spouse to file independently.  Whether it is wise to actually do so, however, requires careful thought.

Consider, firstly, that federal bankruptcy law is nothing like state divorce law, especially in California. Bankruptcy and community property codes are like oil and water; the two do not mesh well and if a bankruptcy comes amidst a divorce – or a divorce comes amidst a bankruptcy – resolution of both matters becomes clouded. So, while it is healthy for married people to remain confident that their relationship is strong, the unforeseeable does happen, and if it happens near or during a bankruptcy, the consequences – and assuredly the expenses associated with each – are prohibitive.

Next, understand that even the finances of the non-filing spouse will come under scrutiny when the other spouse files. That is, the court will consider the mutually-produced household income in order to determine if the filing spouse is even eligible to file for Chapter 7. The non-filing spouse, then, effectively creates a presumption of abuse under the Means Test for the filing spouse, even if the filing spouse has little to no income. Other nuances, mostly related to calculating repayment and current monthly income, also apply.

Of course, the benefits should be factored in, as well.  The non-filing spouse may have good credit. This would be protected by not filing for bankruptcy. In other words, the credit of the non-filing spouse is unaffected by the filing-spouse’s bankruptcy. Also, one spouse may have filed for bankruptcy within the prior eight years, thereby precluding a new filing. Just be cautious when considering filing alone, if married. The costs of filing bankruptcy do not go up if the petition is for one person or two. Therefore, carefully consider hiring a lawyer who will charge more for a joint filing versus a single filing.

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