Married Couples and Personal Bankruptcy

Married couples often have separate finances, yet at the same time, they tend to share a home, furniture, and motor vehicles. What happens when only one spouse plans to file for personal bankruptcy? Is it possible for only one spouse in a marriage to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy? In the event that only one spouse files for liquidation bankruptcy, how will the bankruptcy court handle joint assets? These are just some of the questions that spouses have when only one of them is considering consumer bankruptcy. To help you learn more about what is at stake and what might happen in such a situation, we will run through some key points.
Individual (Separate) Property Versus Marital
Generally speaking, when only one spouse considers filing for personal bankruptcy, it is often because she or he has individual, or separate, debts that she or he cannot manage. In other words, if the debts were marital debts, it is more likely that the spouses would be planning to file for bankruptcy together.
It is important to understand that, even if you are married, each spouse is individually responsible for his or her own debts. This remains true even if the spouse incurs the debts during the marriage. For instance, if Spouse A has a credit card in his name only and incurs $50,000 in debt on that credit card over the course of the marriage, then Spouse A may be eligible to have those debts discharged by filing for Chapter 7 bankruptcy. Will Spouse B, the other partner in the marriage, be impacted by Spouse A’s decision to file for personal bankruptcy?
In terms of whether Spouse B will be required to declare bankruptcy also, the short answer is no. When Spouse A files for Chapter 7 bankruptcy (or Chapter 13 bankruptcy), Spouse B will not necessarily have to file for bankruptcy, too. However, Spouse B may be impacted when it comes time to take the means test for Chapter 7 bankruptcy, or if there are marital assets that will need to be liquidated.
Chapter 7 Bankruptcy Means Test
When only one spouse within a marriage decides to file for Chapter 7 bankruptcy, the nonfiling spouse will not necessarily have to file for bankruptcy, too. However, the spouse seeking bankruptcy protection will need to meet the “means test” in order to be eligible for a Chapter 7 discharge. As the U.S. Courts website for “Bankruptcy Basics” explains, if an individual debtor has a current monthly income that is higher than the Illinois median, then that debtor will have to go through the “means test,” which ultimately determines whether it would be an abuse of Chapter 7 to allow the debtor to discharge his or her debts.
When determining income, the nonfiling spouse may need to provide certain information about income. Since married couples’ financial situations can very widely, it is important to speak with a bankruptcy lawyer about your case.
In addition, if the spouse seeking bankruptcy protection is eligible for Chapter 7 bankruptcy, certain marital property may be subject to liquidation. For instance, if the married couple owns multiple vehicles together, and the property is not exempt, it may have to be sold. An experienced bankruptcy attorney in Chicago can look at your particular assets and can help you to understand what an individual Chapter 7 bankruptcy filing may mean for certain marital property.
Contact an Oak Park Bankruptcy Lawyer
If you have questions about filing for personal bankruptcy, an experienced Oak Park bankruptcy attorney can answer your questions today. Contact the Emerson Law Firm to learn more.
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