Your husband or wife might be opposed to filing bankruptcy with you. The good news is that you are not legally REQUIRED to file a joint case. Many cases are filed singly, regardless of marital status. However, it is often to your advantage to file together to qualify for the benefits that are most important to you. As a practical matter, the benefits that you are seeking might not be achievable any other way.
For example, a bankruptcy discharge will only the cover the person who files the case (the “debtor”). If a debt is owed jointly, the non-filing spouse will not be covered by the debtor’s discharge. Where a debtor and the non-filing spouse owe a joint debt and a Chapter 7 is filed, the debtor would be discharged of the debt. However, the non-filing spouse would continue to owe it, and would continue to be subject to collection activity.
In a Chapter 13 (not Chapter 7), the debtor may protect the non-filing spouse on a jointly-owed consumer debt. The debtor does this by providing in the plan that the debtor will pay the debt in full through the plan. While this protects the non-filing co-obligor, it might make the plan more expensive because plan payments have to be high enough to pay the debt. Otherwise, if the debtor will not pay a joint debt, the court will “grant relief from the automatic stay” to allow the creditor to be paid by the non-filing co-obligor.
Suppose you owe a car note jointly with the non-filing spouse, and you intend to pay for that car through your Chapter 13 (whether the spouse files with you or not). You can do this even if you file by yourself. However, in order to fully protect the other party, you would have to pay the full contract interest on the car. This can make a big difference if the contract interest rate is high. By contrast, if you choose to file a joint case, you may reduce the contract interest rate and receive a discharge without paying that high interest.
Suppose your spouse doesn’t owe any debt, or can handle his or her debt without filing with you. In that case, he or she does not have to file. However, you still have to include the spouse’s income and expenses in your budget. (A non-filing spouse’s name and social security number are not included in the bankruptcy petition, even though the Trustee can and does require “proof of income” from the non-filing spouse. This information is not published publicly). Thus, the bankruptcy should not affect the non-filing spouse’s credit so long as debts are not owed jointly.
The budget includes household income and expenses even in a single filing. If you think about it, your ability to pay debt is very much affected by your spouse’s income, because he or she pays some of the bills. In a Chapter 13, your budget must show that you have the ability to pay what your plan requires you to pay. Otherwise, the plan is “infeasible”. Similarly, in a Chapter 7, your budget must show that you can afford to pay for the debts that you want to “reaffirm”, such as your car or your house. Without your spouse’s income, you probably couldn’t afford to do that.
Please call us at 678-519-4143 to discuss your particular situation with our lawyers.