If you are married you can save time and money by filing a single bankruptcy petition together with your spouse. This is called a joint bankruptcy filing. Read on to learn more about how a joint bankruptcy works and what to consider before filing jointly.
What Is a Joint Bankruptcy Petition?
When you file a joint bankruptcy, you and your spouse file a single set of bankruptcy papers with the court. In your bankruptcy petition, you disclose all property, debt, income, and expenses you have between both you and your spouse.
How Are Debts Treated in a Joint Bankruptcy?
In a joint bankruptcy, you have to list all debts owed by both spouses. This includes all joint debts and all debts owed individually by you and your spouse. With a single joint bankruptcy you can wipe out both of your dischargeable debts without needing to file two individual bankruptcies. However, the types of debt you have and if they are owed jointly or individually can significantly affect whether a joint bankruptcy is in your best interest. This is discussed in more detail below.
How Does a Joint Bankruptcy Affect Your Property?
Just like your debts, you must also disclose all property you own between you and your spouse. Whether owned jointly or individually by either spouse (this is called separate property), all of your property becomes part of the joint bankruptcy. This can potentially pose a problem if the value of your combined assets is more than the exemptions available to you in bankruptcy.
Exemptions in a Joint Bankruptcy: Can You Double Them?
Only certain states allow you to use the federal bankruptcy exemptions. If you live in one of these states and you choose to use the federal exemptions, then you can double the amount of your exemptions by filing a joint bankruptcy. If you can’t use the federal exemptions or choose not to, then whether you can double your exemptions in a joint bankruptcy depends on your state. Some states allow double exemptions in joint bankruptcy but others don’t. Further, if you want to apply a double exemption to a single piece of property, you must own that property jointly with your spouse.
To learn more about exemptions and to find out if you can use the federal bankruptcy exemptions, see our Bankruptcy Exemptions area.
Benefits of Filing a Joint Bankruptcy Petition
There are several factors you should consider before deciding to file a joint bankruptcy. Below are some of the benefits of a joint filing.
Lower Bankruptcy Costs
Bankruptcy filing fees are the same whether you file an individual or a joint bankruptcy. So if both you and your spouse intend to file, you will save money on filing fees with a joint bankruptcy. Further, you will likely save a lot of money on attorney fees (if you decide to hire an attorney) by filing a joint bankruptcy instead of two separate bankruptcies.
Eliminates All Dischargeable Debts
If only one spouse files bankruptcy, the non-filing spouse is usually still liable for his or her separate debts and share of any joint debts. By filing a joint bankruptcy, you can wipe out all dischargeable debts owed by you and your spouse.
When you file for bankruptcy, you must provide extensive financial documentation and attend at least one hearing with the bankruptcy trustee. A joint filing is more efficient because you will only need to gather the documents once and will attend all hearings together.
Disadvantages of a Joint Bankruptcy
Below are some of the disadvantages you should take into account before filing a joint bankruptcy.
One Spouse Owns Too Much Property
If one spouse owns a lot of separate property, then you may not be able to exempt all of your combined assets in a joint bankruptcy. In this case, it may be more advantageous for the other spouse to file bankruptcy alone because any separate property of the non-filing spouse will not be part of his or her bankruptcy.
Too Much Priority Debt Owed by One Spouse
Priority debts (such as certain taxes and domestic support obligations) must be paid in full in a joint Chapter 13 bankruptcy even if only one spouse owes the debt. This can increase your plan payments considerably. So if your income is not high enough to pay off these debts through your repayment plan, an individual bankruptcy by the other spouse may be the better option.
If you're thinking about bankruptcy, check out Nolo's Bankruptcy Information area to get up to speed on what bankruptcy can do and how it all works.