No one wants to file for bankruptcy in any form. Most people look at it like they have failed in some way. When you are facing bankruptcy during your marriage, you want to spare your spouse. Any married individual can file for bankruptcy without their spouse, but there are multiple things to consider first. Florida is a common law state as opposed to a community property state. That means that the debts you and your spouse co-sign for result in you and your spouse sharing those debts jointly. If the financial situation is considered “clean” or the debts are in one person’s name, then filing without including your spouse can make sense. Speaking to an experienced bankruptcy lawyer before proceeding will help you determine Florida’s laws regarding bankruptcy and your spouse.
It is often unclear whether it makes sense to file a joint or individual bankruptcy when married. It depends on your financial situation and the state you are filing. There are a few situations where filing without your spouse makes sense:
There are other reasons you could file bankruptcy without your spouse. These are just a few. What is important is that you choose the best plan for your financial future and unique circumstances. One size does not fit all when it comes to bankruptcy.
Chapter 7 bankruptcy involves liquidating an individual’s non-exempt assets to satisfy creditors’ claims. The completion of Chapter 7 will result in a discharge of the individual’s debt.
After filing Chapter 7, an automatic stay goes into effect. The automatic stay means that harassing phone calls from creditors cease, and legal actions such as foreclosures, repossessions, and garnishments stop. This stay only applies to the individual that filed. If there is joint debt, the spouse may continue to be responsible for that debt.
Chapter 7 requires a means test. It is based on the household income for six months before filing the bankruptcy petition. If you and your spouse share the same house, you must include your spouse’s income even though you filed as an individual. If your spouse has certain expenses that do not benefit the household, you may be able to subtract those from their contribution to the overall household income.
The end goal of a Chapter 7 bankruptcy is a discharge of debt once completed. However, the discharge will not protect your spouse from joint or co-signed debt.
Chapter 13 bankruptcy is called repayment bankruptcy. With this filing, the court works out a repayment plan for debt based on your income and financial situation. Unlike Chapter 7, Chapter 13 includes a co-debtor stay. It prevents creditors from pursuing debt for your spouse during bankruptcy. Your spouse or partner is protected when the stay is in place.
The co-debtor stay does not release the spouse from their obligations for joint debt. The co-signer for any debt remains responsible for paying it. If the spouse meets those obligations, their credit score may not be affected.
Each financial situation is unique and presents its own set of challenges. Doing what is best for you and your family is crucial. A qualified bankruptcy lawyer can help you determine how to proceed with your bankruptcy petition. Like people, marriages are unique, and there are many factors to consider when approaching bankruptcy.
Marital Adjustments: This could apply if your spouse has debts or is supporting another household (i.e., A child from a previous relationship). The court may decide what can be deducted through a marital adjustment claim. Some of those items may include the following from the non-filing spouse:
The courts may deduct any part of income that does not apply to supporting the joint household if it chooses. Therefore, be sure to document any adjustment that you claim.
Spouses With Separate Households: If you and your spouse maintain separate households, you may not need to include their income in the bankruptcy filing. It may be due to your jobs being in different locations or to ease marital tensions. Whether or not to include your non-filing spouse’s income is a matter an experienced Bankruptcy attorney can assist you with.
Spouses With Co-Signed Car Loans: A car loan can be handled in several different ways in Chapter 7 through the Statement of Intentions:
Reaffirming the loan: This is a voluntary agreement to keep the car and stay responsible for the obligation. The debt will not be discharged and remain in place. Therefore, you must stay current on payments, ensuring that the filing does not affect your spouse’s credit score. Reaffirming a loan also allows the creditor to continue reporting to your own credit score and can help substantially on your own credit rating in the future.
Redeeming the car – You borrow money to pay what the car is worth, eliminating the loan and giving you the title. If a co-signer is on the loan and less than what is owed is paid, then you or your spouse must pay the difference unless it is discharged in bankruptcy. This is like getting a new loan; however, the interest rates can be significant and should be approached with caution.
Surrendering the car – You can walk away from the debt, give up the car to the bank or creditor and start over after filing. Surrendering the car could mean it goes to your spouse, who makes the payments, or you give up the car to the creditor. No matter what, the filer’s responsibility for the loan upon surrendering is discharged.
Your spouse is not affected if you choose to reaffirm your loan. However, your spouse could be responsible for the remaining loan balance if you choose to redeem or surrender.
Regardless of your situation, it is always wise to consult an experienced bankruptcy attorney. They know the laws of your state and can walk you through from filing to discharge. It may all sound overwhelming, but it doesn’t have to be. Contact Miller, Hollander, and Jeda today for a consultation. Learn your options for a fresh start and a clean financial future.
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Miller, Hollander & Jeda’s founding attorneys began practicing in the early 1970s before putting down roots in the area and joining forces in 1992 to create the Naples, Florida, law firm that bears their names. Since its inception, Miller, Hollander & Jeda has focused on bankruptcy. The goal of our attorneys and our experienced staff, established at the outset and built upon year by year, is to use our extensive knowledge of bankruptcy law to answer the complicated questions you have regarding your financial trouble and help you solve your problems. We take pride in helping clients get a fresh start.
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