Should One Spouse File Bankruptcy Without The Other? 3 Indicators

30 August 2023
 Categories: , Blog


One of the biggest decisions a married couple faces during bankruptcy is determining if one spouse will file or if both should. There are times when both choices are the right move for the family. How can you decide if just one person claiming bankruptcy protection is sufficient? Here are a few indicators.

1. When Your State Follows Common Law

States generally follow two standards when determining who owns what in a marriage. Common law states largely assign property to whomever is on the deed or whoever paid for the asset. Community property states divide up marital assets 50/50 between marriage partners.

How does this affect your case? The only one whose assets are at direct risk of liquidation is the one who files for bankruptcy. If that person has few assets to their name in a common law state, there's little or nothing to seize to pay creditors. And their partner's common law assets may not be part of the bankruptcy estate. 

2. When You Can Exempt Most Things

Did you know that many Chapter 7 cases don't actually result in the liquidation of assets? This is largely due to the bankruptcy exemptions. These are lists of asset categories and dollar amounts which the person filing bankruptcy is automatically allowed to protect from seizure. If your assets fall within the limits of the exemptions (federal or state) available in your state, there's little or no risk of losing your stuff.

At times, one spouse's assets would be largely or completely exempted but the other's would not. If this happens, the couple may not want to risk the nonexempt assets of the non-filing spouse. 

3. When Non-Marital Property Is Significant

In both community property and common law states, marital property is differentiated from non-marital (or individual) property. Individual assets generally include things that were brought into the marriage, such as an inheritance or court damages award. Property kept completely separate from all marital use may also be considered individual assets. 

Individual assets of the non-filing spouse may not be subject to the same liquidation as the filing spouse. But if you bring both partners into the case, all individual and marital property is fair game. 

Where to Learn More

These are some of the most important factors in deciding if you should file with or without your spouse. But they're not the only elements that can affect your particular case. Find out how your state approaches bankruptcy and learn all about your options by meeting with a bankruptcy lawyer in your state today.