One spouse can file bankruptcy without the other spouse. Each spouse should only file if there is a benefit for each spouse.
A person is liable and owes a debt to a person or company, if that same person contracts with the entity to borrow the money. If two people, such as a husband and wife, jointly, contract with a company to borrow money, both individuals owe the entire amount to the same company. This means, the company can sue both of the individuals for the entire balance due, in the event of a default. However, the company cannot obtain more than the amount that is due. In other words, the creditor can obtain 60% from one co-debtor and 40% from the other, or 90% from one and 10% from the other. A spouse is not liable to the other spouses’ creditor solely due to marriage.
The criteria of a chapter 7 and chapter 13 is not affected by whether a person files alone or jointly with their spouse. In other words, the criteria regarding the household income and expenses are the same whether or not there is a joint filing. This means that if the wife does not wish to file, the court will still include her income, in the determination of the disposable income analysis’.
In general, if the non-filing spouse owes a joint credit card debt with the filing spouse, the non-filing spouse will continue to owe the debt after the bankruptcy filing and discharge. However, if the one filing spouse pays all of the credit card debt through a chapter 13 bankruptcy plan, the non-filing spouse is no longer liable for the debt.
If only one spouse files a chapter 7, the filing of the bankruptcy case does not stop the creditor from pursing the non filing spouse for the debt. In other words, the automatic stay provision of the bankruptcy case does not apply to the non-filing spouse and the creditor can pursue the non-filing spouse at any time after the filing. However, in a chapter 13, the filing of one spouse, does initially, stop a creditor, from pursuing the non-filing joint debtor spouse. If the joint debt is not paid, in full, through the chapter 13 plan by the one spouse, the creditor will be granted permission from the court to pursue the non-filing spouse for the balance that is not paid through the bankruptcy plan.
If a mortgage company is foreclosing on a residence that is jointly owned and mortgaged, there are circumstances, whereby both spouses need not file a chapter 13 to permanently stop the foreclosure action and reinstate the mortgage.
There are a number of strategic reasons why only one spouse should file. There may be a situation that would permit married individuals to save additional equity in their property and/or reduce the amount that must be paid through a chapter 13, in the event that there is substantial equity in their property.
You may contact NJ bankruptcy lawyer Robert Manchel at 1 (866) 503-5655 to discuss your financial issues and options for filing for bankruptcy protection. Schedule a free one hour consultation today!