Can I File Bankruptcy Without My Spouse: Key Details
If you wonder, 'can I file bankruptcy without my spouse,’ the answer is maybe. It depends on the state you live in and your financial situation. It may make more sense to file separately in some cases, but here's what you should consider.
*Note that this article is for general, informational purposes only, and it should not be considered legal, tax, or investment advice. For help with your specific situation, contact the appropriate professional.
Can I File Bankruptcy Without My Spouse?
Choosing to file for bankruptcy is a big decision. Married couples have an even larger decision because you must determine if you should file for bankruptcy with or without your spouse. Filing for bankruptcy without your spouse is possible in some states.
The Law Behind This Debate
For bankruptcy purposes, there are two types of states: (1) community property states and (2) common law property states. If you live in a community property state, in general any community debt or property becomes a part of the bankruptcy.
For example, if your spouse filed for bankruptcy, and together you owned a bank account, a car, and a house, they could become part of the bankruptcy even if your spouse files without you.
If you live in a common law state, only the filing spouse’s interest (i.e. their share) in joint assets plus anything that spouse owns separately are affected by the bankruptcy filing.
How To File Bankruptcy Separately
To file bankruptcy separately or together, it's always best to consider hiring a bankruptcy attorney. A knowledgeable lawyer will help you understand your options and determine if you should consider filing for bankruptcy together or separately.
When Is Filing Separately for Bankruptcy Without a Spouse Appropriate?
You may find many reasons for filing bankruptcy separately/without your spouse, including the following:
The debts are in the name of one spouse: If both spouses aren't on the debt, and the debt is only in spouse #1’s name, then it doesn't make sense to damage spouse #2's credit report (which a bankruptcy does) if there isn’t significant joint debt. This matters because certain debts may be discharged, wiped off the books, through a bankruptcy.
Your spouse may receive an inheritance: If your spouse expects an inheritance, it's best to keep their name off the bankruptcy filing so that you don't affect their inheritance.
Your spouse filed for bankruptcy before: If your spouse filed for bankruptcy recently, they might not be eligible for another bankruptcy filing.
You may want to leave your spouse the option to file in the future: Leaving your spouse off the bankruptcy filing may allow them to file in the future, if necessary.
Factors You Should Consider First
Before deciding to file bankruptcy separately or together, consider these factors.
Separate Households
If you and your spouse live apart, you don't have to include your spouse's income in your bankruptcy filing. Couples may have separate households and household income for a variety of reasons, including:
Job-related reasons that keep you apart
Marital tensions make it easier to live apart rather than together
Military duty
Co-Signed Loans
If you have co-signed loans, consider whether filing separately makes sense. If both spouses are on the debt, but you don't include one spouse in the bankruptcy filing, they may still be liable for the debt. For example, if you file a Chapter 7 bankruptcy, the discharge of the debt typically protects you but not the co-signing spouse. This may still leave the co-signer spouse responsible for the debt.
Marital Adjustment
You or your spouse may have marital adjustment opportunities. This means the courts may exclude a portion of your spouse's income if the funds are necessary for other obligations, including the following:
Solely-owned household expenses
Obligations for child support or caring for a child from another marriage
Obligations for spousal support
Chapter 7 Bankruptcy
When filing for bankruptcy, you must decide which type to file. Not everyone is eligible for a Chapter 7 bankruptcy, but it's often the first consideration.
What Is Chapter 7?
A Chapter 7 bankruptcy typically involves the liquidation of certain assets and a discharge of eligible debts. The court takes possession of certain assets and liquidates them to pay creditors. Any remaining debt may be discharged, meaning you no longer owe that debt.
Most states have a list of exempt property, so you may not lose everything, but always consult a bankruptcy attorney to determine which of your assets would be affected.
Applying for Chapter 7 Married Filing Separately
To file a Chapter 7 bankruptcy without your spouse, you must pass a “means test” for whether you should be able to file for Chapter 7 bankruptcy or if you might be abusing the system. Even though you don't include your spouse in the bankruptcy filing, you must disclose your spouse's income. The court may allow some deductions for the income based on your expenses and those that pertain to only one spouse, but you typically must disclose both incomes.
If there are any joint debts, the automatic stay that a Chapter 7 bankruptcy allows affects only the filing spouse. This means creditors and collectors can still take action against the non-filing spouse.
Filling Out the Forms Without Your Spouse
Filing forms for a Chapter 7 bankruptcy without your spouse is the same as filing with your spouse. You must accurately provide a list of all assets, exemptions to the assets, joint debts, income, and expenses.
Chapter 13
If you don't qualify for a Chapter 7 bankruptcy (i.e. because you make too much money), or you prefer to restructure your debts rather than discharge them, then a Chapter 13 bankruptcy may be a better option. As always, you should consult a qualified bankruptcy attorney.
What Is Chapter 13?
A Chapter 13 bankruptcy restructures your debts, making the monthly payments more affordable so you can more easily satisfy your obligations. You may not pay the entire amount you owe but will pay back creditors as much as your income and financial situation allow.
Applying for Chapter 13 Married Filing Separately
You don't have to pass a means test to file for Chapter 13 bankruptcy. Unlike a Chapter 7 bankruptcy, there is an automatic stay for both the filer and the spouse — the co-debtor stay also stops collectors from taking action against the non-filing spouse.
This does not make the non-filing spouse free from any responsibility for the debt at issue; however, their credit won't be affected if the non-filing spouse pays the (restructured) debts on time.
Filling Out the Forms Without Your Spouse
All forms for Chapter 13 bankruptcy are the same, whether you file with your spouse or without. You must disclose all income, debts, and assets, and work out a repayment plan that suits your income.
Effects of Filing Bankruptcy Without Your Spouse
Filing bankruptcy affects your credit report and assets. Therefore, understanding how your non-filing spouse is affected is important as you make these decisions.
Credit Reports and Scores
When filing for bankruptcy, your credit report and credit scores are the most affected factor. The person filing bankruptcy will have the hardest hit to their credit report; however, any joint debts included in the bankruptcy can affect the credit of the spouse that didn't file.
If the spouse that didn't file doesn't pay the joint debts, the debt will still show as delinquent on their credit and thus could affect their credit scores.
Shared and Separate Assets
If you live in a community property state, shared assets can be a part of the bankruptcy liquidation if you file Chapter 7. However, if you live in a common law state and only one spouse files bankruptcy, the spouse who didn't file must receive payment for their interest in any liquidated assets.
Shared and Separate Debts
Fortunately, any separate debts don't affect a spouse that doesn't file for bankruptcy. However, if there are joint debts, the spouse that didn't file remains liable for the debt, even while the spouse who filed is protected.
Shared and Separate Properties
If you don't live in a community property state, your spouse can have separate property and keep it out of the bankruptcy. But, if you live in one of the community property states, all jointly-owned property becomes a part of the bankruptcy.
Current and Future Interest Rates
It's no secret that bankruptcy affects your credit scores, which in turn could affect your ability to secure financing for a few years. Typically, the more recent a bankruptcy was, the harder it is to get approved for a loan, and even if you do get approved, you'll likely pay higher interest rates.
FAQs
Can One Spouse File Bankruptcy Without the Other?
One spouse can file bankruptcy without the other, but it may not always make sense. Before deciding, determine if you have joint debt and assets that would be affected or if the non-filing spouse won't be affected.
What Happens When One Spouse Files for Bankruptcy?
The spouse that doesn't file for bankruptcy may still be affected by the bankruptcy if there are joint debts. This is because the spouse that doesn't file will still be liable for the debt, even if the filing spouse is protected by bankruptcy law.
Can I File Bankruptcy Without My Spouse Knowing, and How?
It might be possible to file for bankruptcy without your spouse knowing, but it will most likely be difficult. In most cases, you must disclose your spouse's income and any joint debt, and getting this data would usually involve your spouse. It's also probably healthier for your relationship if you’re open about these things, as it cultivates trust and also allows your significant other to best support you. Whatever approaches you’re considering, always best to consult with a bankruptcy attorney before deciding to file for bankruptcy.
Is Martial Status a Factor to Consider Before Filing for Bankruptcy Separately?
Your marital status should affect how you file for bankruptcy. For example, if you live separately and have separate assets, it might make sense for only one spouse to file; however, it might not make sense if everything is combined and/or you live in a community property state.
Will My Spouse's Income Affect My Filing for Bankruptcy Without Them?
In many states, your spouse's income will affect your bankruptcy filing; however, the courts may be able to exclude a certain amount from your spouse's income to cover that spouse’s separate expenses.
The Bottom Line
Filing bankruptcy without your spouse is possible, but it doesn't make sense in all cases. Always consult with a bankruptcy lawyer to determine the right steps and ensure you make the right financial choices for yourself and your spouse. If you're considering filing for bankruptcy with or without your spouse but aren't sure how to get on the same page about it, take advantage of my complimentary consultation!
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Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
