The following in an explanation about whether an individual should file alone or with a spouse. The information does not include options regarding businesses, including, a Corporations, LLC, Partnerships, or d/b/a bankruptcy cases. Joint filed cases are limited to married spouses. Sometimes it may be beneficial for only one spouse to file.
A person is responsible and obligated to pay debt to a particular creditor, only if that person has a contract to pay money to that particular creditor. One spouse does not owe the other spouses’ debt based on marriage. For example, if only one spouse or person signs a credit card agreement to use the credit card and incurs the debt, he is the only one responsible to pay the debt. If both spouses sign the credit card agreement that obligates both of them to pay the debt, than both spouses are responsible to pay the debt.
Under the second scenario, the debt is joint. This means that the creditor may pursue both, the wife and the husband for payment of the debt. The creditor may sue both spouses for the entire debt, but can never obtain more than that amount that is due for the entire debt. In other words, each spouse owes 100% of the debt. The creditor can obtain from each spouse any percentage of the debt that does not exceed 100%. For Example, the creditor may obtain 50% from each spouse, or 60% from one and 40% from the other.
Debts after Divorce
At the time of divorce, one spouse may voluntarily agree to pay the other spouse’s debt, even though she is not responsible for the debt to the creditor. Under this scenario, the creditor may still not sue the spouse that did not sign the original agreement with the creditor, as there is no obligation to pay the creditor directly. No contract between the debtor and a creditor, will affect who the creditor may sue to get the money.
However, if the divorce agreement obligates a wife to pay the husband’s debt to a particular creditor, regarding a debt that is solely his responsibility, the husband could sue his ex wife, if the creditor collected money from the husband, that she failed to pay. Under this scenario, the creditor can still only sue the husband and not the wife. However, the husband can sue the wife because of their contract with each other.
Preserving Credit
Typically, if both spouses need not file, than only one spouse should file, as to preserve the credit of the non filing spouse. Generally, but not always, the criteria for a chapter 13 and chapter 7 is the same, whether one or two spouses are filing. The husband and wife’s income and expenses are used to determine if only one spouse can file a chapter 7 or chapter 13, even though the other spouse does not file. If one spouse files, the non filing spouse is not protected from his creditors regarding certain debt that he owes. If only one spouse files, who owes a joint debt with the non filing spouse, the creditor may pursue the non filing spouse for the debt.
In a chapter 13 bankruptcy filing, the non filing spouse who owes a joint debt with the filing spouse is protected if the entire debt is paid through the bankruptcy case. Under this scenario, if one joint debtor spouse files a chapter 13, and pays the entire debt through the bankruptcy case, the creditor may not sue the non filing spouse. If both spouses owe a joint unsecured debt, that was incurred for a consumer purpose, that is not paid entirely through the plan, the non filing spouse is protecting against the creditor, only for the life of the bankruptcy case. After completion of the case, the creditor may sue the non filing spouse.
If a mortgage is in the names of both spouses and only one spouse files and pays 100% of the mortgage arrears through the chapter 13 bankruptcy plan , the mortgage company may not sue the non filing spouse. Also, the one filing spouse is able to save a house from foreclosure without filing a joint bankruptcy case. Prior to filing, every married couple must review their entire financial situation to determine whether it is more beneficial to file jointly.
Contact a Bankruptcy Attorney
If you are considering bankruptcy and are unsure how to proceed, you should contact an experienced NJ bankruptcy lawyer immediately. The sooner you call, the sooner you can take action with a sound strategy for stopping creditors and starting to rebuild your finances. For a free consultation, call today at 866.503.5655.