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Should You File A Joint Petition for Bankruptcy?
While bankruptcy is typically thought of as something for individuals or businesses, in some cases bankruptcy is right for married couples. To qualify for a joint bankruptcy petition, a couple must be legally married. Cohabitation alone is not enough to qualify. A married couple may seek joint bankruptcy under either Chapter 7 or Chapter 13.
The joint petition is ideal for couples who together have accumulated large amount of debts as it can cut down on the time and money involved in pursuing two separate bankruptcy cases, but there are also several other considerations involved in determining whether joint bankruptcy is the best course of action.
Joint Debts Mean Joint Bankruptcy May Be Right for You
The biggest consideration in whether to file for bankruptcy jointly is the nature of the couple’s debts, particularly if they are joint debts. A joint debt is a debt that both spouses are responsible for. A good example of this is a home or car loan that the spouses agreed to pay off together. If the primary purpose of seeking bankruptcy is to discharge the obligation of a large number of joint debts, joint bankruptcy may be the right choice for the couple.
When filing a petition for joint bankruptcy, each spouse must disclose all of their debt, income, and assets, which are pooled together in the joint bankruptcy proceedings. California allows for double exemptions of certain property by both spouses when seeking bankruptcy, making it a friendlier state in which to pursue a petition for joint bankruptcy. But this is only in cases of exempt property. If one spouse owns a large amount of nonexempt property, it may better for only the other spouse to file for bankruptcy in order to protect those assets.
When Is a Joint Bankruptcy Petition Not the Right Decision?
A joint bankruptcy petition is rarely the best choice for couples in instances where one spouse alone has accumulated a large amount of debt, such as high credit card bills or several mortgages only in one spouse’s name.
Another consideration when looking at joint bankruptcy is the credit scores of the spouses. If both spouses have the same credit scores, particularly low credit scores, then joint bankruptcy is probably the best way to go about discharging those debts. However, if only one spouse has a damaged credit score due to inability to pay off certain debts, it may be best for that only that spouse to file for bankruptcy individually. This can give that spouse a new start and also allows the other spouse to obtain credit more easily for the couple’s expenses.
Benefits of a Petition for Joint Bankruptcy
A joint bankruptcy petition can substantially cut down on fees. In many cases, one spouse is certainly ready to file for bankruptcy while the other spouse may feel like they can hold on for a few more months or years. While it’s understandable that many people want to avoid bankruptcy, having both spouses file at the same time can also avoid the process of again having to gather all of the necessary documents just to go through the same process again later. Combining the cases into one proceeding from the start can also ensure that individual debts are discharged as well as joint debts, while if only spouse files for bankruptcy, the other spouse will still be on the hook for joint debts.
The Downsides of a Petition for Joint Bankruptcy
In some cases, a court will not allow a joint bankruptcy petition because one spouse has previously declared bankruptcy or because the court believes there is an issue of fraud or concealing assets on the part of one spouse. In Chapter 13 bankruptcy cases, the biggest obstacle for joint bankruptcy petitions is often priority debts. Priority claims are made up of certain taxes as well as child support and alimony obligations that can never be discharged in bankruptcy. In Chapter 13 cases, these debts can raise the costs of a repayment plan to the point that pursuing a joint bankruptcy petition is in impractical.
Thinking About Filing a Petition for Bankruptcy?
If you and your spouse are considering filing for bankruptcy, then an experienced bankruptcy attorney can help you determine whether to file for bankruptcy independently or jointly. The Law Offices of Melanie Tavare of Hayward and Oakland can assist you in reducing or eliminating debt through Chapter 7 or Chapter 13 bankruptcy. Contact the Law Offices of Melanie Tavare at 510-255-4636 or online.
The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
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