If you are married and about to declare bankruptcy, you need to be aware of the additional set of legal options available to you as compared to individual debtors. To avoid the unnecessary stress of filing a joint bankruptcy with your spouse, make sure to familiarize yourself with important facts about the bankruptcy process and flesh out the nuances of bankruptcy filings between individuals and married couples.
Filing Bankruptcy in California
The two most common types of personal bankruptcy filed by individuals in California courts are Chapter 7 or Chapter 13. In a Chapter 7 bankruptcy, otherwise known as liquidation bankruptcy, the debtor gives up almost all unprotected or nonexempt properties into a bankruptcy estate in exchange for having most debts wiped out. Through a trustee, creditors will be paid off with the funds generated from the sales of assets.
On the other hand, you keep your properties in a bankruptcy Chapter 13, but in exchange, you create a reorganization plan which modifies and extends the payment schedule in order for you to repay what you owe.
For married couples, a common confusion arises from determining who should file for bankruptcy and whether it is possible to be done by only one party. Can you file on behalf of your partner? Yes! Under bankruptcy laws, you are not obliged to have a joint bankruptcy filing even though most couples choose to do so.
Joint Bankruptcy Filings
The most important requirement for bankruptcy filings by married couples is mutual agreement or consent. If one of the partners is against filing for bankruptcy, then a joint filing is out of the question. In rare cases of disagreement, some couples even end up filing bankruptcy individually.
Should you and your spouse decide to file together, you need to be prepared to face different possible scenarios. First, if you have shared debts owed a single creditor, even if you were able to get protection for yourself, creditors may still be harassing your partner. The only way for the harassment and wage garnishment to stop is when both of you file with the bankruptcy court and receive the automatic stay.
Next, it is possible to have your debts, such as car loans, personal loans, and mortgages to be discharged after a period of time. However, this doesn’t mean that the debt relief will also apply to your husband or wife. In such a case, repayment for the remaining debt is still required.
Moreover, for Chapter 7 bankruptcies where assets are seized, you need to consider all shared properties or nonexempt assets as all your properties will be included in the bankruptcy estate. If there is reason to believe that one spouse has a higher amount of valuable assets, then it would be better to declare bankruptcy on your own.
When it comes to your financial situation after bankruptcy, be ready to rebuild your credit from scratch. Don’t be misled by the notion that the credit damage is irreparable. Yes, bankruptcy has an impact on your credit history but there are many methods you can follow to boost your credit scores in a few months, contrary to the notion that it will take seven years or more.
Perhaps one benefit of jointly filing bankruptcy under Chapter 7 is the chance to have more bankruptcy exemptions and therefore keep more of your property. Although the doubling of exemptions is not allowed in California, there are some exemptions to the rule. You may consult with a bankruptcy attorney or debt lawyer to know if you and your partner qualify for any of these exemptions.
Regardless of whether you submit an individual or joint bankruptcy petition in court, you will still be required to go through a means test. This will determine if your income level fits the criteria set for filers of Chapter 13 or 7 bankruptcy. If bankruptcy is under both of you, then your combined income will be the one considered in this test. This is why sometimes, a borrower may pass the evaluation as a single filer, but fail if submitted with the legal partner.
Getting Help From a Pasadena Bankruptcy Attorney
There are options available if you are filing for bankruptcy as a married couple. If you are struggling with and considering bankruptcy, seek advice from a bankruptcy lawyer knowledgeable in state regulations and bankruptcy law, such as Daniela Romero, who has over two decades of experience practicing law.
At the Law Office of Daniela Romero, APLC, we believe in relationships that are based on trust. We make sure to find the right fit for you and make you comfortable in discussing important financial issues that will have a lasting impact on your life. Call us today to take the first step to a fresh start with your partner.