Must a Husband and Wife File A Joint Bankruptcy

As with tax returns married couples have the option of filing a joint bankruptcy petition, and when they file a joint bankruptcy both husband and wife will receive a discharge of their debts. However, as their bankruptcy attorney will point out to them there is no requirement that they file a joint bankruptcy, and a married person is free to file an individual bankruptcy.

Whether a married couple should file a joint bankruptcy is another question, and before offering advice on this point the bankruptcy attorney will have to look at the circumstances in each case. When the debts are all in joint names the answer is pretty obvious that a joint bankruptcy will work better. If one spouse files the bankruptcy court will discharge his or her liability for the debts, but the creditor will be free to collect the debt against the other spouse who does not receive a bankruptcy discharge. Of course the each spouse could file their own individual bankruptcy, but then the family will incur the extra expense of two separate legal proceedings.

One exception to this principal might be if the only significant joint debt is a mortgage in default, and either the husband or wife wishes to file a Chapter 13 bankruptcy to stop the foreclosure. The spouse filing can payback the arrearage through a bankruptcy plan, and at the end of the term of the plan the bankruptcy court will fully reinstate the mortgage. This can backfire however, if unexpected circumstances keep the debtor from making the required payments. In this case the Chapter 13 bankruptcy will fail, and the foreclosure will proceed. When this happens the debtor will frequently convert the Chapter 13 bankruptcy to a Chapter 7, which will discharge the debt that arises from any deficiency in the foreclosure sale. However, the mortgage company will still be able to pursue the other spouse to collect the deficiency unless that person files his own individual bankruptcy.

The other simple situation that calls for an individual petition is when all the debts are in the name of either the husband or the wife. In that case there is no benefit to the other spouse filing bankruptcy, and the one with the debts should file an individual Chapter 7 Bankruptcy or Chapter 13 bankruptcy. The question becomes more complicated though when the spouses have separate debts.