Individuals may file for bankruptcy for themselves or jointly with a spouse. Bankruptcy allows for the discharge of debt. “Discharge” means that the debt becomes legally forgiven and wiped out forever, without the individual paying it. It makes sense for spouses to file together when they each have a lot of debt. For instance, both spouses may have a lot of credit cards in their names individually, or joint credit cards.
They may also be cosigners on various loans, such as personal loans, auto loans, and home mortgages. To be a cosigner on a loan means that both individuals are liable for the entire amount of the loan. If spouses are jointly liable for a large amount of debt, and this is more than they are able to pay on their own, then filing for bankruptcy together makes sense. In Minnesota, medical debt of one spouse that was incurred during the marriage is the legal responsibility of both spouses. Therefore, in these situations, it is beneficial for both spouses to file together if the medical debt is sufficiently high.
In some situations, it may make more sense for an individual to file for bankruptcy without their spouse. For example, the debtor’s spouse may have a lot of property in their name only. This could cause issues in bankruptcy, particularly if the spouse’s property is “nonexempt,” which means it is not protected from being liquidated to pay the debtor’s creditors. Another instance in which it would not be beneficial to file together is if the debtor’s spouse previously filed for bankruptcy. The Bankruptcy Code prevents debtors from filing consecutive Chapter 7 bankruptcies within eight years. It also prevents debtors from filing a Chapter 13 bankruptcy less than four years after filing a Chapter 7 and prevents debtors from filing a Chapter 7 less than six years after filing a Chapter 13. Lastly, even if both spouses have a lot of debt, it may not make sense for a spouse who is a high-income earner to file for bankruptcy if he or she can pay their own debt, as filing for bankruptcy would hurt their credit score.
If you are considering filing for bankruptcy and would like experienced advice on whether your spouse should file with you, come visit us at our new location in the Cathedral Hill neighborhood of St. Paul, Minnesota, or come see us at LifeBackLaw.com!
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