Does My Spouse Need to File Bankruptcy With Me?

Couple with Financial Problems

Does My Spouse Need to File Bankruptcy With Me?

This is a frequent question, so here are the pros and cons. Please remember that my answer is written only for those people living in Pennsylvania. The short answer is no, your spouse does not necessarily need to file. If your spouse doesn’t want to file, then they won’t be required to file. On the other hand, if you live with your spouse, then the bankruptcy laws will require your spouse to disclose to you (and provide to you) his or her paystubs for the past 6 months. This is due to the Means Test requirement that all household income be itemized and disclosed. One caveat, if you’re separated, then obviously, you no longer share a household, and thus, your spouse’s income information is irrelevant.

The harder question is whether your spouse should file. The answer is that it all depends on the case. If you’ve got joint unsecured debt, like credit cards or personal loans, then if you file bankruptcy, it won’t discharge (wipe out) your spouse’s liability for those joint debts. So, it’s a good idea to obtain individual credit reports for both you and your spouse to verify their debt exposure.

A Good Tip for Chapter 13 Filers

There are certain times in which it’s more advantageous for a spouse not to file. One particular instance is when you have to file a Chapter 13 case that will last for 5 years. If your spouse doesn’t have significant debt, then perhaps it’s best that he or she not file. The reason is that if you need a new car during the course of the Chapter 13 case, then it’s easier for your non-filing spouse to be approved for a car loan.

A big advantage of your spouse not filing with you is that your house will still be protected during a Chapter 13 case. The reason is that the Chapter 13 “co-debtor stay” will protect your house from a mortgage foreclosure during a Chapter 13 case in the event that only one of you files for bankruptcy relief.

IF you have comments or questions about this or other debt issues, please let me know below!

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