How Does Joint Bankruptcy Work?

Married couples who are faced with an overwhelming amount of debt may benefit from filing for joint bankruptcy. However, it’s important to understand that each couples financial situation is different and bankruptcy isn’t a “one size fits all” approach to debt relief. There are some instances in which filing jointly may not be helpful to a couple financially. Here are some things all married couples should know about bankruptcy.

Is Joint Bankruptcy the Right Option?

When filing for bankruptcy as a couple, all debts owed — both individually and jointly — must be listed on the petition. Joint bankruptcy can be a viable option to wipe out a married couple’s debt without having to file a petition separately — saving you bankruptcy filing fees and costs. However, there are some scenarios which filing jointly may not be beneficial. In such cases, an experienced bankruptcy attorney can review your finances to determine whether or not to leave your spouse out of the bankruptcy petition.

What Debts Are Dischargeable?

Depending on what types of debt you have and your financial goals, each bankruptcy chapter has its own set of rules on what is and is not dischargeable. Here are some ways each chapter can help alleviate debt for married couples.

Chapter 7

  • End harassing phone calls from debt collectors
  • In most cases, you can keep your house and car
  • Most household possessions can be protected
  • Eliminate unsecured debt such as credit cards and other unsecured loans
  • Get a fresh start in a matter of a few months

Chapter 13

  • End harassing phone calls from creditors
  • Stop home foreclosures
  • Protect certain assets from creditors
  • Protection for third parties (co-signers)

Many married couples are concerned about what happens to property in bankruptcy. The state of California is a community property state, meaning that married couples share ownership of any property and debt obtained through the marriage. Before making a final decision on whether to include your spouse, you should consult an experienced bankruptcy attorney to guide you in the right direction.

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