Marriage, Pre-Marriage Planning And Bankruptcy
June 2, 2014
I get a lot of questions about Marriage and Bankruptcy. One question is “I have a lot of debt: should I file Bankruptcy now or wait until we get married?” The second question often asked is whether a married couple should file a joint bankruptcy or whether only one party should file.
These are excellent questions as one’s financial future is at stake. That is why it is best to call the law offices of Robert J Adams & Associates. The office has lawyers with many years of experience counseling clients on this question. We are dedicated to helping our clients work out the best possible solution to their financial problems.
ADVANTAGES TO FILING A JOINT BANKRUPTCY
If both spouses require financial debt relief, they can file one case thus avoiding separate legal and filing fees for 2 cases, and a joint case is more efficient.
If the couple co-signed debts for each other, and only one spouse files the bankruptcy the other spouse is not protected. This especially true of one of the joint debts is a car loan.
At the conclusion of a joint bankruptcy case both spouses will have put the worst of their financial problems behind them and be ready to rebuild their credit.
Married couples living together are subject to the Means Test for both incomes. This means that you have to add the annual gross income of both parties. If there is a big difference in income this could work out bad for the person who needs the bankruptcy.
For example: Spouse or fiancée A would like to file a Chapter 7 and earns $40,000 per year while Spouse or fiancée B does not need a bankruptcy but earns $100,000 per year. Most likely if married Spouse A would have to file a 5 year Chapter 13 and likely with a high dividend to unsecured creditors.
One Spouse owns too much property. For joint cases, all property owned by either spouse is involved in the case. If one spouse owns any valuable property, the other may benefit from filing the case individually.
For example: Assume Spouse A is burdened with debt and has little property in his/her name while Spouse B has a great deal of property in his/her name far exceeding allowed exemptions. In this case it would be best for Spouse A to file an individual case since he/she only needs to list property in his/her own name and not the spouse’s property.
Too much priority and/or Non dischargeable debts of one spouse
When a couple files a joint Chapter 13 all debts must be included. Having a large priority debt (such as taxes and/or child support obligations) might require a much higher Chapter 13 payment. An individual case might be the best option for the one without the priority debts.
Mortgage Arrears and/or Condo Arrears
When the primary or sole purpose of filing a Chapter 13 is to save the home and there is little other debt, I generally advise clients not to file a joint Chapter 13. Any experienced lawyer can give you a fuller explanation.
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