Can You File Bankruptcy Without Your Spouse?

 Posted on June 15, 2018 in Bankruptcy Procedure

Many people mistakenly believe that if you are married and filing for bankruptcy, you must do so jointly. You have several options after determining that bankruptcy is the right choice. If you are unmarried, you will file independently. If you are married, you may file jointly or as an individual. Both spouses may also choose to file bankruptcy separately, at the same time. Strategically, one option may suit your situation better than the others, depending mainly on location, debts, and assets.

Texas and the Other Community Property States

Texas, along with nine other states, is a community property state. Meaning, any assets or property acquired during marriage belongs equally to both spouses, even if only one spouse’s name is on the contract. The assumption is that all decisions are made together, rather than individually, and both parties are contributing their fair share. Any items owned before the marriage are excluded from the community property, as are any items inherited or given only to one spouse after the union began; this is separate property.

More Property Is at Risk

If you choose to file bankruptcy without your spouse, more property is at risk in community property states than in common law states. In a common law state, only the separate property owned by the filing spouse becomes a part of the bankruptcy estate. In Texas, any community property not covered by exemptions is at risk for seizure. In some cases, filing for bankruptcy together doubles the amount of the exemptions, allowing spouses to keep more items.

The Affected Debts

In a community property state, there, fortunately, is no such thing as community debt. Each spouse has separate obligations for accounts solely in their name, as well as any held jointly. If one spouse files independently, their individual accounts, as well as their joint accounts, are dischargeable. The non-filing spouse experiences what is known as a “phantom discharge” or "community discharge." Any community property co-owned by both parties becomes off-limits to discharged creditors, including wages. However, because the non-filing spouse did not file, their separate property is unprotected and at risk of seizure to satisfy the debt for joint accounts.

What Is Right for You?

Navigating the avenues of bankruptcy is often confusing and stressful for filers. Attorney Chance M. McGhee has over 20 years of experience assisting clients just like you begin their journey to a better financial future. If you have questions about how to file or wonder about the best option for your situation, a New Braunfels bankruptcy attorney is here to give you the answers you need. At the Law Offices of Chance M. McGhee, we are dedicated to helping you through the process. Call us today at 210-342-3400 for your free consultation.