Do Both Spouses Have to File for Chapter 7 Bankruptcy?
You may think Chapter 7 bankruptcy is the best alternative to crushing debt. If your spouse doesn't agree, that doesn't mean you can't file: There is no legal requirement that you and your spouse file bankruptcy as a couple. Your family's financial circumstances will determine whether joint filing is a smart move.
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Chapter 7
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Chapter 7 bankruptcy gives a court-appointed trustee the power to take your assets and cash--except for whatever is exempt under your state's laws--and sell them off to pay your creditors. Your remaining debts will be discharged except for debts such as child support and back taxes, which survive Chapter 7. Although Chapter 7 can discharge mortgages and car loans, it can't remove the lender's claim on your property, so you're still at risk for repossession or foreclosure if you stop paying.
Income
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To qualify for Chapter 7, your average income for the six months before you file must be lower than the state median for a family of your size. Alternatively, you can try passing a means test that adjusts your income for living expenses. If you file as a couple, that means your joint income will be used to determine whether you qualify for Chapter 7. Rochester, New York attorney Alexander Korotkin states in an online article that, if you have access to your partner's income and assets, the court may include them in its calculations even if you file alone.
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Considerations
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Even married couples don't always buy things together; if most of the debt you want to discharge is in your name, it may be easier for you to file alone. It's also possible that filing separately will keep your spouse's credit intact. If the debts are jointly owned and you file alone, on the other hand, it won't discharge your spouse's obligation to pay and the creditors can go after him. In a community property state, the court can't sell any of your family's community property after your individual discharge; only your spouse's separate property is at risk.
Assets
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If your spouse has assets in her own name, the court trustee can't sell those off if you file by yourself, states northern California's Moran Law Group. Any joint property you own, or any community property in a community property state, is liable for sale, however. In some states, filing jointly will allow you to increase some of your exemptions so you can protect more of your property. If you try shifting assets to your spouse to protect them, the bankruptcy trustee has the authority to cancel the transactions.
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