No, Your Spouse is Not Required to File Bankruptcy With You
This is a common question. Often, we will have a prospective client who really wants to file bankruptcy and get a fresh start, but his or her spouse is adamant about not filing. Don’t worry, the spouse is not required to file. Of course, each case is different and should be examined on its own merits. Generally though for someone interested in filing bankruptcy in Pennsylvania, it is not required.
For example, if you are considering bankruptcy and the debts are all in your name, then your spouse would have no need to file jointly with you. There would be no point to that, after all. Again, this is Pennsylvania law, and I presume that if you reside in a community-property state, the laws are completely different.
Strategy in a Chapter 13 Case
In fact, many times, particularly in a Chapter 13 case, I might not want both spouses to file. This is because if the family needs to get a new car during the 3 to 5 year Chapter 13 case, then the non-filing spouse can simply go out to a dealership and get a replacement car rather easily.
So, let’s take a typical case. Let’s say that Wife wants to file and most of the unsecured debts are in her name. How will Husband be affected? First, the Wife’s bankruptcy filing will not impair Husband’s credit rating. In other words, if Husband later pulls a credit report, it won’t be reported that Husband filed a bankruptcy case.
Still Need to Know the Spouse’s Income However
However, if Wife wishes to file, then we’ll need to know Husband’s income. Remember that the Bankruptcy Code requires a disclosure of all household income. So, I would need to review Husband’s paystubs to determine Wife’s eligibility for bankruptcy (this is the Means Test review).
But, Husband’s assets (those that he owns just in his name) will not be required to be disclosed in Wife’s bankruptcy paperwork. Any jointly-held assets will obviously need to be disclosed.
What about jointly-held debts? At the end of Wife’s case, her dischargeable debts will be eliminated (for example, credit cards, personal loans and medical bills). If Husband is a co-signer, then he will still owe on those debts. This is something to be planned ahead of time.
Again, this article pertains to Pennsylvania residents, and you shouldn’t draw any conclusions for non-Pennsylvania individuals, where the laws are undoubtedly different.
If you’re not sure about the liability, then a credit report can be very handy. A credit report will show, for example, whether a credit card account is an individual account, or jointly-held, or whether it’s simply an authorized user status. In our example, let’s say that Husband was able to use Wife’s credit card account, it’ll state on his credit report that he was an authorized user on her account. Therefore, if Wife files a bankruptcy case, then her liability for the account will be discharged (wiped out) and Husband won’t be responsible for payments because he was merely an authorized user, and not a cosigner.
The bottom line is that each case is unique, and with proper planning, and a good examination of the couple’s debts and assets, a joint bankruptcy filing might be the best outcome, but certainly not in every case.
If you have questions or comments, please email me at email@example.com or call me at 412-920-6565.