Huh, you say? Doesn’t the traditional wedding ceremony include the charge that “what God has joined together, let no man put asunder“? (I’ll let you know more when I’ve Googled “asunder“). But I suggest that although the code permits married couples to file bankruptcy together, it certainly does not require it. I am finding more and more situations when filing only one spouse gets a better result for the happily married couple.
Before you read further: I practice in a community property state and some of my analysis exploits the community property provisions of §524. If you don’t practice where community property is the law, you need to dig out and understand the personal liability of one spouse for debts incurred by the other, under the law of your state, and also the marital property laws for purposes of §541: what property comes into the bankruptcy estate of a married person filing alone.
My reasons to file only one spouse:
- Together, the couple exceeds the Chapter 13 debt limits.
- A bankruptcy filing is a real and serious impediment to the career of one spouse.
- Personal liability for the couple’s debts is concentrated in one spouse.
- Preservation of the opportunity for bankruptcy relief in the near future.
- One spouse has significant separate property which would become liable for debts in bankruptcy that it is not liable for under state law.
A little thought should show you the myriad of combinations of factors at play here. There’s lots of room for close analysis and creative use of the Code.
To apply this axiom, you need to treat each spouse as a separate instance and analyze the debts for which they are liable and the property they have (or may stand to inherit) to assess how opting out of filing will affect them. Look at the results if they file together as opposed to one filing alone, or even each filing sequentially.
And, as one of my lawyer friends famously reminds us: anytime two people are sitting across from you, you are presented with a conflict. (That may be fodder for another day).
Can you add to my list?
(If you practice in a community property state, I cannot overstate the importance of mastering the nuances of the community property discharge in 524(a)(3).)
Image courtesy of Nina Matthews Photography.