Choosing to marry and choosing to file for bankruptcy are major life decisions. Neither should be taken lightly, and both should be considered with the present and the future in mind.
You probably married “for richer or for poorer.” How bankruptcy figures into that commitment is unique to every couple.
Married couples are not required to file for bankruptcy jointly. The spouse with more debt and earning little income can file for bankruptcy as an individual. However, whether it makes wise financial sense to file jointly or individually can be complicated. An experienced bankruptcy attorney can help you and your spouse sort through the pros and cons so you can decide what is better for you both.
At Oregon Fresh Start, I help couples in Bend, Hermiston, Portland, and Eugene, Oregon, cut through the noise. Bankruptcy is designed to give those who file a financial do-over. Therefore, filing should benefit you and your spouse, regardless of whether you file jointly or not.
What If I File for Bankruptcy as an Individual?
There are pros and cons to filing for bankruptcy as an individual. Bankruptcy remains on your credit report for a period of time which, of course, decreases your credit score. If you file as an individual, it will have a negative, although temporary, effect on your credit score but your spouse’s score will remain intact. Your spouse’s score may allow you to make major purchases later that you would be unable to if both your scores went down.
Chapter 7 bankruptcy discharges most debt, which makes it an attractive option for many filers. To qualify for Chapter 7, a filer must pass a “means test” which demonstrates their debt far outweighs the income they earn and other financial support they receive to ever pay it off. However, your spouse’s income and the support they provide will figure into the means test equation which could disqualify you from Chapter 7.
In addition, if your creditors can find evidence that your spouse has benefited from your credit card, they could come after your spouse even if some of that debt is discharged in bankruptcy. Since credit card debt is often some of the highest debt bankruptcy filers have, you should discuss this with your bankruptcy attorney.
Chapter 13 bankruptcy restructures debt in a three- to five-year repayment plan rather than completely discharging all debt right away. Again, your spouse’s income and your community property will be part of the equation that determines how much debt you must repay to your creditors.
What If We File for Bankruptcy as a Couple?
Filing bankruptcy as a couple also has its advantages and disadvantages. One of the advantages is that all the non-exempt debt you and your spouse have, individually and jointly, is addressed and either discharged in a Chapter 7 bankruptcy or restructured in a Chapter 13 bankruptcy. You both emerge with a clean financial slate.
Of course, the lowering of each of your credit scores is a disadvantage. Until the bankruptcy comes off your credit reports and you have each made changes to use credit more responsibly after your fresh financial start, both of your scores could prohibit you from credit approval for a while.
What Are Some Key Considerations When Trying to Decide?
As with any bankruptcy, it is smart to explore your options with an experienced bankruptcy attorney. Your attorney can walk you through the options of filing individually or jointly and also look at your income, dischargeable debt, and assets protected in bankruptcy. Based on experience and legal expertise, your attorney can advise you regarding the short- and long-term implications of filing jointly or individually.
Get Trusted Legal Advice
At Oregon Fresh Start, I help clients in Bend, Hermiston, Portland, and Eugene, Oregon, take the long view when considering bankruptcy. The decision is yours and your spouse’s to make. I am dedicated to providing the information and guidance you need to make it.
If you are considering filing for bankruptcy, look to Oregon Fresh Start for trusted legal advice. Call my office today to schedule a consultation.