The Pros and Cons of Filing Joint Bankruptcy

If you’re married, you may be considering filing joint bankruptcy to get a fresh financial start. Whether you’re considering Chapter 7 bankruptcy or Chapter 13 bankruptcy, there are some pros and cons of joint bankruptcy you should know before you make a final decision. If you have questions about joint bankruptcy, Chapter 7 bankruptcy, Chapter 13 bankruptcy, or other debt resolution alternatives for you and your spouse, call the Law Offices of B. David Sisson to schedule your free consultation after you finish reading this article.

The Pros of Filing Joint Bankruptcy

When you’re married, you may be eligible to file a joint petition for Chapter 7 bankruptcy or Chapter 13 bankruptcy with your spouse. Those two types of bankruptcy operate a bit differently from each other. Very briefly:

  • Chapter 7 bankruptcy is generally designed for individuals or married couples (in this scenario) who have few to no assets. In an asset case, the assets that are not exempt under federal bankruptcy code or state exemptions are sold by the trustee to pay creditors. There are several exemptions allowed. Examples include a certain amount for the vehicle, the homestead, and a clothing allowance. For no-asset bankruptcy cases, which make up the majority of Chapter 7 cases, there are no assets to sell and the debtor or joint debtors receive their discharge at the end of the bankruptcy case.

  • Chapter 13 bankruptcy is generally designed for individuals or married couples (in this scenario) who have assets they do not wish to sell and who have disposable income that they can use to repay some of their debts over a period of three to five years through a bankruptcy court-approved repayment plan. It can be used to save a home that is in foreclosure.

Broker making a presentation to a young couple showing them a document which they are viewing with serious expressions

There are several advantages associated with filing for joint bankruptcy.

  • Although both spouses are listed, only one filing fee is paid.

  • Although both spouses are filing on the bankruptcy case, they benefit from the legal advice provided by the attorney.

  • Most spouses share accounts of some kind, such as credit cards, loans, and mortgages. By filing a joint petition, creditors are stopped from harassing the non-filing spouse for payment on a past-due bill.

  • If you and your spouse are a two-income household, filing a joint petition makes it easier to qualify for Chapter 13 bankruptcy. Chapter 13 bankruptcy is unique because you do not lose otherwise non-exempt assets.

  • A joint petition is more efficient since you and your spouse can attend all mandatory meetings, credit counseling, and other requirements together.

  • Your debts are discharged together.

The Cons of Filing Joint Bankruptcy

Of course, while a joint bankruptcy case can be beneficial, there are some potentially concerning factors that you should weigh as well before making this decision.

  • If you or your spouse have previously filed for bankruptcy, you may not be eligible to file a joint petition. How long you must wait to file a joint petition depends on whether you or your spouse filed Chapter 7 bankruptcy or Chapter 13 bankruptcy, whether a discharge was received, and which bankruptcy Chapter you’re considering.

  • The exemptions you need or want to claim could also be an issue depending on the state you live in. Not all states allow married couples to double their exemptions in a joint bankruptcy. They must claim only what is allowed in a single bankruptcy. It is important to understand how exemptions work in your state for both individual bankruptcy and joint bankruptcy. In Oklahoma, you can protect more property if you file a joint bankruptcy. Think long and hard about property owned as well as exemptions in your state before deciding whether to file a joint petition.

  • You or your spouse have a significant amount of priority debt that must be paid. Priority debt examples include certain taxes, child support, and alimony. Priority debts must be paid in full in Chapter 13 bankruptcies. These debts can greatly increase the cost of plan payments. This factor should be a consideration before filing a joint petition.

  • Only one of you carries most of the debt and there isn’t much of value that’s been accumulated during the marriage. Filing joint bankruptcy may not be the best solution.

  • Both you and your spouse will experience the same impact on both your individual credit reports and scores. However, if you both had credit issues before the bankruptcy, the impact may not be that noticeable.

Joint Bankruptcy: Understand Your Options

Before you file a joint petition, it is important to understand all of your options. There are advantages and disadvantages to having discharged debts from a joint Chapter 7 bankruptcy or Chapter 13 bankruptcy. However, discussing the facts involved in your specific situation is the best way to determine if a joint petition or individual petition will best suit your needs. Other considerations include whether you meet the median income to file for Chapter 7, whether you have the disposable income to enter into a Chapter 13 repayment plan, and whether you’re looking to keep your home from being foreclosed upon.

To learn more about whether filing a joint bankruptcy with your spouse is the best option for your financial future, the Law Offices of B. David Sisson offers free consultations. During your consultation, you can learn more about how a Chapter 7 or Chapter 13 bankruptcy can give you and your spouse a brighter future. 

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