Finances are tough for married couples. When one spouse incurs or comes into the marriage with more debt than the other, it can be hard to decide whether to file bankruptcy jointly or separately. However, several considerations should be made before determining which way to go when you choose to file.
Filing a Joint Bankruptcy
Filing jointly means the debts and property of both spouses will be considered in the bankruptcy. This would include debt and property acquired before marriage and during the marriage. Texas is a community property state. This means any property or debt acquired by either party during the marriage is considered marital property.
Can One Spouse Declare Bankruptcy?
Filing separately for bankruptcy means that only one married spouse files a bankruptcy case. That person lists their separate debts brought into or incurred during the marriage, and any community property of the couple would be included.
When it comes to claiming property exemptions, that spouse would only be able to claim what a single person could claim. It is possible to file separately even though it does seem counter-intuitive since the couple is married.
Benefits of Filing a Joint Bankruptcy in Texas
Some of the benefits for filing a joint bankruptcy include:
- If the spouses have accumulated assets and debts since being married, it might be in their best interests to file bankruptcy as a couple.
- This is because it may be too difficult to determine which assets are marital and which assets are separate property.
- Filing together can reduce costs as only one filing fee and one attorney fee will be required.
- If the spouse who owes most of the debt files separately first and then the other spouse files later, additional legal and filing fees will have to be paid. However, if the spouses agree to file jointly, they may include their respective separate debts in the joint bankruptcy.
- Couples can take advantage of bankruptcy exemptions to keep their property.
- Texas allows for exemptions for houses, cars and other items of personal property.
- The State of Texas allows married couples to double what they can exempt over what individuals filing separately can exempt.
Cons of Filing a Joint Bankruptcy in Texas
Drawback to filing a joint bankruptcy in Texas may include:
- If a couple wishes to file jointly but one spouse has recently gone through a bankruptcy, (ie: within the most recent eight years for Chapter 7 bankruptcy or most recent six years for Chapter 13 bankruptcy), only the other spouse may be eligible to file.
- Filing bankruptcy jointly may affect both spouses involved, meaning that the spouses' credit scores will both be affected.
If the spouse who had the debt before marriage came into the marriage with a lower credit score while the other spouse carried a significantly better score, the couple should discuss whether the spouse with the lower score should file separately.
Benefits for Married Couples Filing Separately in Texas
If one of the spouses has come into the marriage with more debt than the other, it might be wise for that one spouse to file separately for bankruptcy. Further, if the couple has not acquired much in terms of community property, filing separately for bankruptcy might be wise.
Cons for Married Couples Filing Separately in Texas
If the couple decides to have only one spouse file for bankruptcy, any community property that the couple owns will be included in the bankruptcy process.
For this reason, many couples choose to have one person file separately before getting married. This way, the property acquired later by both does not get put into the bankruptcy estate. The separate property of the non-filing spouse will remain their separate property.
Contact an Arlington Bankruptcy Attorney for a Free Consultation Today
A bankruptcy attorney can assist in weighing the pros and cons listed to help a couple determine the best course of action. Every case is different, and what works for one couple may not work for another.
An experienced Texas bankruptcy lawyer can help you analyze your finances to determine the best way possible for managing your debt. We can also address any concerns you have about bankruptcy as a married couple. Call the Law Office of Marilyn D. Garner now at 817.381.9292 for a free consultation today.