must i file bankruptcy with my spouse?
Must married people file bankruptcy jointly. No, it is possible for a married person to individually file for bankruptcy, however, there are several key issues to be aware of. Especially if the couple live in a community property state like Arizona.
What is a Community Property State?
Community property laws make it so that whatever items accumulated during marriage and jointly owned—regardless of how it is titled.
COMMUNITY DEBT
For example, if you are married and your wife opens a credit card—in ONLY her name—takes the new credit cart and goes on a shopping spree and racks up $10,000 in debt, guess what? You just became half owner of that credit card debt! For this reason most couples in Arizona file for bankruptcy jointly.
COMMUNITY ASSETS
A second example is if you were to go down to the Chevy dealership and pay cash for a shiny new Corvette—and title it in only your name—your spouse just became half owner of the new car!
NON-FILING SPOUSE’S NON-EXEMPT ASSETS
Additionally, all assets of the non-filing spouse must also be included a.k.a “listed” in the bankruptcy. Why does this matter? Well your spouse may own non-exempt assets and they may be subject to confiscation by the bankruptcy court. Non-exempt assets can be a wide variety of “things” both tangible and intangible. A non-exempt asset could be a second home, land, time-share, stocks, bonds, certificate of deposits, motorcycle, boat, etc.
Considering bankruptcy and divorce?
Are you married and considering bankruptcy and divorce? Then you may be wondering if it is better to file bankruptcy and then divorce or if it is better to file for divorce and then file for bankruptcy. Generally, we recommend to file bankruptcy jointly and then file for divorce. Why?
One of the benefits to filing for bankruptcy while still married is the cost. The cost for a married to file bankruptcy is the same as it is for a single person. Meaning that if you wait until you are divorced to file bankruptcy, both you will pay separate attorneys, filing fees, bankruptcy classes, etc.
Another benefit to filing bankruptcy while you are still married is that you will have a clean slate once you are divorced. If you file bankruptcy first, then all of your debts will be discharged. Then when you file for divorce there won’t be any debts that the judge has to split between you and your ex-spouse.
Alternatively, if you and your spouse decide to get a divorce and then file for bankruptcy the family court judge will have to split the debts between you two. And what if after the bankruptcy your ex-spouse stops paying on their portion of the debt and doesn’t file for bankruptcy? It just makes a cleaner break if you file bankruptcy and then file for divorce.
If you would like to set up a consultation with an experienced bankruptcy attorney then contact the Dunaway Law Group at 480-702-1610 or message us HERE.
* The information provided is informational only, does not constitute legal advice, and will not create an attorney-client or attorney-prospective client relationship. Additionally, the Dunaway Law Group, PLC limits its practice to the State of Arizona.