If you are experiencing financial difficulty and considering filing bankruptcy, one of the first decisions to make is whether to file bankruptcy by yourself or to file bankruptcy with your spouse. What you decide can have a long-term effect on your financial situation.
Filing Bankruptcy without Your Spouse (aka Individually, Non-Filing Spouse)
When a husband files bankruptcy without his wife, he discharges his liability for debt but her liability is unaffected. This means that if they have credit cards for which they are both liable, the creditor can still collect from the wife. The main reason someone might file bankruptcy without their spouse is if the debt was incurred before the marriage. Debt that was incurred before the marriage is the responsibility of the party that incurred the debt. The debtor’s spouse isn’t liable for this debt, so unless they have their own debt that needs to be discharged, there is no reason for them to file bankruptcy, because the creditors cannot seek collection from the spouse. If the spouse does not need to file bankruptcy then she can maintain her credit rating which may allow the household to finance purchases in the future using the non-filing spouse’s good credit rating.
Filing Bankruptcy with Your Spouse (aka Jointly)
Most married people incur debt together. As a result, filing bankruptcy individually makes little sense since the creditor will still be able to collect from the spouse. Filing jointly allows both parties to discharge their debt, whether it is held jointly or was incurred before the marriage. The bankruptcy will protect all exempt property in the household whereas filing separately cannot protect the non-filing spouse’s separate property.