What Do Married Couples Need to Know When Filing for Bankruptcy?

 Posted on July 05, 2022 in Bankruptcy

Debt can be a serious problem for many families, especially when they encounter financial difficulties that make it difficult or impossible to pay back what is owed. When married couples struggle with debts, they may have a variety of concerns, including whether they will be able to maintain ownership of their home and how they will be able to cover their family’s ongoing expenses. For couples who are unable to fully pay back the debts they owe or who looking to prevent a home foreclosure, bankruptcy may provide much-needed relief. However, it is important to understand the options when filing for bankruptcy and the laws that apply to married spouses in these cases.

Filing Bankruptcy Jointly or Separately

Married couples will usually combine their finances, sharing joint bank accounts and credit cards, taking out loans in both of their names, and working together to pay bills and expenses. Because of this, it usually makes sense for a couple to file for bankruptcy together. A joint bankruptcy petition will take the income earned by both spouses into account, and all of a couple’s debts, including those they obtained together or separately, may be considered. If a couple qualifies for Chapter 7 bankruptcy, they may receive a discharge of all of their joint and separate debts. If they opt for Chapter 13 bankruptcy, both of their incomes will be used to determine the amount they will pay toward a three-to-five-year repayment plan, and this option may allow them to avoid the loss of their home or other property.

There are some situations where it may make sense for a person to file for bankruptcy separately from their spouse. This may allow a person to address their individual debts while minimizing the impact on the other spouse’s credit score and finances. This option may be used in cases where spouses have not combined their finances or where they maintain separate accounts or sole ownership of other assets. Separate bankruptcy filings may also be a good idea in cases where a couple is going through the divorce process or plans to divorce in the future.

If one spouse will be filing for bankruptcy individually, a couple will typically want to make sure their assets and debts are separated as much as possible. While bankruptcy may discharge one spouse’s obligations to repay a joint debt, a creditor may pursue repayment from the other spouse. Jointly-owned marital assets may be subject to seizure and liquidation in a Chapter 7 bankruptcy, and it will be important for couples to understand which assets will be included in the bankruptcy estate. When separating assets, couples will need to understand what types of transfers can and cannot be made. In general, a person cannot transfer assets to someone else, including their spouse, within one year before filing for bankruptcy.

Contact Our San Antonio Bankruptcy Lawyer for Married Spouses

If you are considering filing for bankruptcy together with your spouse, separately, or before or after a divorce, it is important to understand the laws that will affect you and the options that are available. At the Law Offices of Chance M. McGhee, we can help you understand the best ways to protect yourself and avoid issues that could prolong the bankruptcy process or affect your ability to receive relief from your debts. To set up a free consultation and learn how to get the fresh start you need, contact our Kerrville bankruptcy attorney at 210-342-3400.

Sources:

https://www.abi.org/feed-item/do-married-couples-have-to-file-bankruptcy-together-0

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.42.htm

https://www.law.cornell.edu/uscode/text/11/547