When a married couple contemplates the possibility of filing bankruptcy, they might naturally wonder whether they should file together. They might also wonder what the ramifications would be if they do not. For most couples, filing jointly will be to their benefit as it will afford both spouses the benefits implied by the bankruptcy, rather than simply conferring these benefits on one spouse but not the other. However, there are certain circumstances in which this is also not the case. Herein we shall examine when and why spouses may wish to file together, and what choosing not to file together ultimately looks like.
Under the rules of the bankruptcy code, married spouses are allowed to file cases jointly. What this means in practical terms is that rather than filing two bankruptcy cases separately (as unmarried individuals must) married couples may instead share a single bankruptcy case together. This means that they attend the same hearings, typically share the same attorney, and related to this, generally pay only what it would cost for a single individual to file, despite the fact that both spouses are receiving the benefit of the discharge.
The benefits conferred by bankruptcy are extensive, beginning with the discharge of debt that occurs at the conclusion of both Chapter 7 and Chapter 13. Another significant benefit offered by bankruptcy is known as the automatic stay – a broad legal shield that prevents the collection of most debts, and which stops or delays most forms of civil lawsuits. There are a myriad of other benefits offered by bankruptcy that can be influenced by a variety of different factors including the chapter filed, but the automatic stay and the discharge are the two we will focus on here.
With regard to the question - “What Happens If I File Bankruptcy And My Spouse Does Not?” – The answer is that the non-filing spouse will not receive the benefits of the bankruptcy filed by the spouse who has chosen to file bankruptcy. This means that the non-filing spouse will not receive a discharge of debt, so if the spouses share any joint debt, such as a credit card that they are both named on, or a personal loan that they have co-signed together, that only the spouse who has filed bankruptcy will see their obligations on this debt eliminated in the discharge. The non-filing spouse would still be attached to this debt in the same way that they were prior to the bankruptcy being filed.
Secondly, the non-filing spouse will not receive the same protections from the automatic stay that the filing spouse does. However, the non-filing spouse may still receive something called a “co-debtor stay”. Essentially, this is an extension of the automatic stay that also protects a non-filing co-debtor when one or more other co-debtors on a loan have filed bankruptcy. However, this co-debtor stay differs from the conventional automatic stay in that it only protects the non-filing spouse with regard to debts that they are co-signed on with the spouse who has filed for bankruptcy.
Additionally, the co-debtor stay does not prevent a non-filing spouse’s credit from being negatively impacted in the same way that the automatic stay protects someone who is going through bankruptcy. If one spouse has filed Chapter 13 for example, and is paying off a (co-signed) vehicle through the Chapter 13 plan, then their co-signing spouse would usually not be pursued by the lender for payment because of the co-debtor stay, but the non-filing spouse could still see their credit adversely affected given that the original terms of the loan are not being observed, and the non-filing spouse is not fully protected by the bankruptcy in the way that the spouse who has filed bankruptcy would be.
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More often than not, if one spouse in a married couple is filing for bankruptcy, it is worthwhile for both spouses to file together jointly. However, there are also a number of different circumstances in which filing together could also be difficult or impractical, and determining the ramifications of one spouse not filing with the other is of the utmost importance when determining how to proceed in such a situation. Thankfully, the experienced attorneys at our firm are more than happy to help you navigate this question and determine what would work best for your unique circumstances and situation. So, when the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to www.lifebacklaw.com.
