Must Your Spouse Declare Her Assets if You Declare Bankruptcy?
Transcript:
Matt: Hi, Matt McArthur, Clear Counsel Law Group bankruptcy attorney here. I recently received a question that I receive on a regular basis. It was from an individual who was married that wanted to file without their spouse, wanted to file for bankruptcy and not have any negative ramifications on their spouse's credit. What they wanted to know was whether or not their non-filingphad to disclose their financial information to the bankruptcy court. The answer is yes. The reason is twofold.
First, if the individual is filing for Chapter 7 bankruptcy, even though the spouse is not filing bankruptcy with this person, we still have to look at the non-filing spouse's income to determine whether or not the person looking to file for bankruptcy passes the Chapter 7 means test. If an individual makes too much money, if the household income is too great, then that individual won't be allowed to file for this specific kind of bankruptcy. Because the person is married, the non-filing spouse, whether they're filing or not is included in the analysis of what the income is for the household.
We have to look at the non-filing spouse's income. We also need to look at the non-filing spouse's property. In a Chapter 7 bankruptcy, it's a liquidation. We determine whether or not a filing person has the ability to protect all property that they have a legal right in. Even though the spouse is not filing bankruptcy, if you live in a community property state, like Nevada, the spouse that is filing for bankruptcy may actually have a legal right to property that is owned by the non-filing spouse so the non-filing spouse's property could come into question. If it is separate property, then obviously that is not subject to liquidation. I see that we have a question related to this topic. Brian?
Brian: Does it make sense then to just file Chapter 7 bankruptcy together as a couple because the property and the income will be subject to it?
Matt: Yes, for many cases it makes most sense to file jointly for both spouses. The reason you would do that is you're disclosing all of this information about income and assets anyway so you might as well gain the advantage of getting a discharge for debts that are in both spouses' names. There may be a reason why one partner might not want to file for bankruptcy. It wouldn't appear on the non-filing spouse's credit report, the bankruptcy wouldn't and it might make it easier to qualify for obtaining mortgage loan within the first couple of years after the filing of bankruptcy. Otherwise, the advantages of filing jointly outweigh a separate filing.
If you're thinking of filing for bankruptcy and you're a married individual and you're worried whether or not it would be best to file alone or together, please come in and see me. I'll discuss the ramifications of both scenarios with you. We can talk about what makes best sense for you in your particular situation. I look forward to seeing you soon. Take care.
