If a couple wants to file for bankruptcy, they can make the process more efficient by filing a joint petition rather than filing individually. The papers included in the joint petition will cover all of the spouses’ assets and income, as well as their total debts and expenses. The property listed in the petition will include not only the marital property owned jointly by the couple but also the separate property owned individually by each spouse. Likewise, the debts will encompass not only the shared debts that the spouses owe as a couple but also the individual debts of each spouse. You can have all of these debts discharged through a single bankruptcy rather than going through separate proceedings.
While a joint bankruptcy might seem like the natural solution to a couple’s financial troubles, it is not necessarily the right choice for every couple. Read more below about situations in which a joint bankruptcy might or might not be appropriate.
Pros and Cons of Filing for Joint Bankruptcy
The most obvious advantage of pursuing joint bankruptcy as a married couple is the reduction in costs and time. You will pay the same filing fee as a couple that you would as an individual, so filing jointly would cut these costs in half. Any other fees related to the proceedings, such as attorney fees, also would be halved. The proceedings will be relatively efficient because there will be only a single set of documents and a single sequence of events.
Joint bankruptcy also can be a more thorough way of discharging debts. If only one spouse files, while the other spouse does not, the spouse who does not may still be on the hook for their portion of any debts owed by the couple together.
Joint Bankruptcy Pros and Cons
Thoroughly discharges debts
Must include all debts
Will affect both spouses’ credit scores
May not provide sufficient exemptions
On the other hand, a joint bankruptcy may not be appropriate if one of the spouses is in a significantly different financial position from the other. For example, one spouse might owe child support arrears and overdue taxes, which must be paid off completely if you file under Chapter 13. The couple might struggle to meet their payments under the plan if they include these debts, so the spouse who owes them may want to file separately. Also, if one spouse acquired a substantial amount of property before entering the marriage, covering the property with sufficient exemptions may not be feasible. The spouse who does not have as much property may want to file individually in this situation, excluding the separate property of the other spouse from the bankruptcy.
Whether joint filers may apply a double exemption depends on the applicable rules in their state and how they own the asset.
Exemptions allow a debtor filing for bankruptcy to protect certain assets from being taken to pay their debts. If your spouse and you file separately, you will have access to two sets of exemptions. Does this work if you file jointly? The answer depends on the exemptions in the state where you live and also on whether your state allows you to use the federal exemptions. If your state does allow you to use the federal exemptions, and you choose to use these exemptions rather than the state exemptions, you can double your exemptions.
You cannot apply a double exemption to a single asset unless you own that asset jointly with your spouse as marital property. For example, if you want to claim a double homestead exemption for your residence, you would need to make sure that both of your names are on the title.