Filing bankruptcy is a serious decision. If you are unfamiliar with the different types of bankruptcy and how they work, it can be challenging to determine how it may benefit you. Although married couples can file joint bankruptcy, sometimes it is best for just one spouse to file. There are several factors that must be taken into consideration when determining whether an individual or joint filing will best suit your needs. Bankruptcy laws vary from state to state so it is important to speak with a local bankruptcy lawyer who can assess your financial situation and advise you of your options.
Consider Which Debts You Want to Discharge
Getting out from under overwhelming debt is typically why people and businesses file bankruptcy. If you and your spouse file jointly, you can get rid of all the dischargeable debt you both owe. Although it varies from case to case and the type of bankruptcy you decide to file, examples of dischargeable debt include:
- Car loan payments
- Mortgage payments
- Credit card debt
- Personal loan debt
There are some debts that cannot be wiped out in bankruptcy, including child support and alimony payments, student loans and tax debt. However, there may be exceptions depending on where you live and your specific situation, so speaking with a lawyer before you file is critical.
If one spouse has considerable debt and the other does not, it may be wise for only one spouse to file. If you carry a significant amount of debt jointly, filling together is likely your best bet. Both your individual and shared dischargeable can be included in a joint filing. Because the main goal of filing bankruptcy is to get rid of debt, choosing the option that enables you to discharge more of your debt and keep more of your property makes sense.
How Much Debt Does Each Spouse Have?
It is not unusual for one spouse to enter a marriage with more debt than the other. In this case, filing an individual bankruptcy can allow the other spouse to keep a good credit rating, which is important when applying for a loan or mortgage. Bankruptcy can stay on your credit report for ten years, so this is an essential consideration.
How Much Property Do You Own?
A joint bankruptcy filing includes both spouse’s assets and property. However, some property is exempt, and depending on the state in which you live, you might be able to keep more of your property if you file jointly. If you own property held as tenancy by the entirety, which is a property that is jointly owned as a single marital entity, you may be able to shield it if only one spouse files. There are also homestead exemptions that can allow you to keep your home, but it can be tough to determine what is exempt and what is not without the assistance of an experienced bankruptcy lawyer.
Estate Planning Considerations
Choosing a law firm that offers estate planning services can help you protect your assets from potential future creditors. Putting assets in an irrevocable trust can shield them from creditors and help your beneficiaries avoid probate. This type of estate planning tool must be created in the right way, so it’s critical to seek the counsel of a seasoned estate planning or probate attorney.
If you need assistance with bankruptcy filing or estate planning, Carosella & Associates can help.