For couples going through a tough time financially, bankruptcy can be one way to get you the debt relief you need. But before you jump in and file a joint bankruptcy, you may want to speak to an experienced North Carolina bankruptcy attorney. You should make sure you won't be better served by an individual bankruptcy filed by only you or your spouse. Here's what should be considered.
#1 There is no requirement you must file together
You may assume that you and your spouse must both file bankruptcy together, but this is absolutely not true. While your entire household income will be considered when evaluating whether you can file Chapter 7 or the terms of your repayment plan in Chapter 13, you do not have to file together. In some cases, it may be advantageous not to file jointly and in other cases, smarter to file jointly.
#2 Consider which debts you need help with
With most married couples, there is debt in the husband's name, some in the wife's name and some jointly. In rare cases, there may be no jointly held debt. To check, pull both of your credit reports and look at which accounts are in common. Then see which debts you're struggling to pay – if most are in only one spouse's name, it may be a better bet for only that spouse to file the bankruptcy.
#3 Advantages to filing an individual rather than joint bankruptcy
If most of the delinquent debt is in just one spouse's name, filing an individual bankruptcy may allow you to get current on any past due debt in the other spouse's name and protect their credit rating. This can be particularly true with a Chapter 7 since it will wipe out all unsecured debt of the filing spouse. You can then free up funds to devote to the remaining debt.
#4 Disadvantages of filing individual versus joint bankruptcy
For any co-signed debt, if one spouse files a Chapter 7 bankruptcy, the entire legal weight of the debt will flip to the co-signer. If you cannot afford to service the co-signed debt after the Chapter 7, it will continue to drag down the credit rating of the non-filer. In this case, it may be preferable to go ahead and file jointly. With an individual Chapter 13, you'll have more time to catch up on co-signed debt.
#5 Consider what assets you need to protect
North Carolina bankruptcy exemptions that allow you to protect a reasonable amount of assets during a bankruptcy. For instance, as an individual filer, you can protect $35,000 of equity in a home. If you have more equity than this, you may want to file jointly so you can protect up to $70,000 of equity as a couple. All exemptions double when a couple files bankruptcy rather than an individual.
#6 Evaluate the state of your marriage
Money problems are a major source of contention in a marriage and one of the top causes of divorce. If your marriage is on the rocks as well as your finances, you should have an honest discussion about the fate of your marriage. If you divorce, then one of you files an individual bankruptcy, the other party could be left owing any co-signed debt no matter what your divorce papers say. Better to file bankruptcy, clear up your money issues then enter into the divorce process.
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