When married couples file for joint bankruptcy, both spouses combine their property and their debt into a single case. There are advantages and disadvantages to filing jointly as well as filing separately. There are, however, several factors to take into consideration before deciding which avenue to take. In this blog, our Indianapolis bankruptcy attorneys discuss ways in which both filing jointly with your spouse and filing separately would be beneficial to your case.
When to File Without Your Spouse
When filing for joint bankruptcy, you can wipe away all of the dischargeable debts that both you and your spouse owe, but there are instances in which filing alone makes more sense. If the debt in question is solely under your name, it could make filing separately more desirable to keep your partner out of bankruptcy court. This also allows the non-filing partner to retain a good credit score, as bankruptcy filings will remain on your credit report for up to ten years.
Another thing to consider is whether you and your spouse signed a prenup before your marriage. If a prenup was signed, your finances are already separate from your spouses, making all debt accrued before the marriage only your responsibility. This makes filing for bankruptcy separate worthwhile to ensure that your spouse's finances and current credit rating remain untouched.
If you and your spouse did not sign a premarital agreement, your spouse might be held liable for any outstanding obligations after any discharge from filing separately. So, keep in mind that filing jointly may be the better option if you bear many of the same financial burdens.
When to File for Joint Bankruptcy
It might not be in your best interest to file for bankruptcy separately only to protect your spouse's assets or credit score if you are joint holders to the same debt. Meaning, if you gain a discharge on the joint debt, only you will be relieved of the debt and not your partner. If your spouse is listed on any of the joint property in question, your creditor still has the ability to charge them the full amount. Along those lines, your spouse's credit will have already been affected if you are joint holders of the debt, defeating the purpose of filing separately for bankruptcy.
Filing for Bankruptcy During Divorce
If you plan on filing for bankruptcy during a divorce, it is best to speak to an attorney to obtain legal counsel. If you and your spouse are looking to file for bankruptcy and legal separation, it might be in your best interest to file for bankruptcy first. A bankruptcy attorney can analyze your specific situation and help you determine which option is best for you.
Part of filing for bankruptcy is determining the value of your assets to see how they can be used as compensation for your debts, while a part of divorce is dividing those same assets between the two parties. When bankruptcy is officially filed, an automatic stay (the process of freezing all of you and your spouse's assets to determine what can be used as compensation) is then put in place. Once automatic stay occurs, it can make dividing your assets almost impossible.
If you choose to file bankruptcy first, a chapter 7 bankruptcy could be the ideal option for a relatively quick divorce. Chapter 7 bankruptcies typically eliminate all dischargeable debt within three to six months, which allows you to file for divorce sooner, and have your financial debts squared away beforehand.
Call Our Indianapolis Bankruptcy Lawyers Today!
Navigating the complexities of filing for bankruptcy can be tiring and stressful. If you're considering filing for bankruptcy, and you aren't sure if you should file joint or separate, you need an experienced bankruptcy attorney on your side. At Jackson & Oglesby Law LLC, our bankruptcy attorneys are able to assess your situation and provide the best course of action for you. We are devoted to providing compassionate guidance that can begin with a free bankruptcy evaluation. Secure our representation to observe the benefits of working with a caring lawyer who uses a personalized approach for each client's case.