Bankruptcy: Pros And Cons For Filing As A Married Couple
If you are married, it is likely that you do almost everything together, or at least, you are on the same page about almost everything in life. But what about bankruptcy? Do you have to file bankruptcy jointly as a couple or can you file as just one person even though you are married?
You are legally allowed to file for Chapter 7 or Chapter 13 bankruptcy, even if you are married. There are some benefits and drawbacks to both. The question is whether it’s a good idea or a bad idea to file jointly, assuming you have the choice (that is, there isn’t some emergency that requires that you file one way or the other).
To file for Chapter 7 bankruptcy, you must earn below a certain income level in order to be able to file (if you are over that amount, you can always opt to file for Chapter 13 bankruptcy). Unfortunately, opting to file individually doesn’t lower your income—the court will still base your income for the purposes of Chapter 7 on your joint marital income.
The most obvious drawback to filing individually as opposed to jointly is that if you have joint debts, only the spouse that filed bankruptcy will get the discharge.
So, if both husband and wife have a $10,000 credit card debt, the spouse that did not file for bankruptcy could still be pursued for the debt, even if the filing spouse no longer can after receiving the bankruptcy discharge.
One positive of only one party filing for bankruptcy is credit. The non-filing spouse will not have their credit affected by the other spouse’s bankruptcy. This can help get car loans, or other things that require credit immediately after a bankruptcy.
One benefit of a joint filing is the increased exemption limits. The bankruptcy exemption limits are per person, meaning that they are doubled when both parties file. If you have a $1,000 personal property exemption, that becomes $2,000 when married couples file jointly.
Tenants by the Entireties
In Florida, married couples that own property together are protected under what is known as tenancy by the entireties (TBE). However TBE has one major limitation—it only applies where one spouse has a judgment against them. The same applies for bankruptcy.
If both parties file for bankruptcy, there is the possibility that the TBE exemption may not exist the way it would if only one party filed for bankruptcy.
For those who have assets that will exceed the other exemptions, TBE may be a way to protect additional assets, which may be lost if the parties file jointly. However, if all of the debtor’s property is exempt anyway, losing or weakening the TBE exemption may not mean much anyway.
Lastly, costs can be reduced when a party files jointly—the parties are paying one filing fee, one attorneys fee, etc.