How does North Carolina's bankruptcy law work? The North Carolina bankruptcy laws explain the legal…
Do I Have To File Bankruptcy With My Spouse?
No, your spouse is not required to file for bankruptcy with you. Your income, assets, and debts will determine whether you file separately or jointly. Our office will assist you in making a decision and comparing the advantages and disadvantages of a joint bankruptcy filing against an individual bankruptcy file.
While it may make sense for both spouses to file bankruptcy, a knowledgeable bankruptcy lawyer can help you navigate the options that are best for you. Married couples typically hold debt in a variety of ways, so it’s important to consider the circumstances of your situation before making a decision. Although filing jointly may result in higher debt reduction, there are other issues to consider.
Debts, Debts, Debts, Debts, Debts,
If you and your spouse have different debts, you might choose to file separately. When you file for bankruptcy without your spouse, your debt is dismissed, but your spouse’s debt is not. When one spouse files for bankruptcy, the debt owed to the other spouse is discharged. It’s worth noting, though, that the non-filing spouse is still responsible for the entire debt. As a result, many married couples decide to file for bankruptcy together.
My Husband’s Credit
One reason to file separately is to protect one spouse’s credit. This is usually a clear option in circumstances where partners do not have shared debt. The filing spouse gets a discharge for the debts he owes, while the non-filing spouse keeps her good credit and her debts.
Because North Carolina is not a Community Property state, even if a married couple has joint debt, the non-filing spouse’s credit score will not be harmed if she pays her obligation on time.
Is it Important to Have a High Income?
Income is a factor in determining whether you can file a combined Chapter 7 bankruptcy and in calculating your monthly payment in a Chapter 13 bankruptcy petition. When both spouses submit, the monthly budget includes total household income. This has an impact on Chapter 7’s Means Test and Chapter 13’s disposable income. It’s worth mentioning that the figures include all household expenses as well. The purpose is to provide the court with a complete financial picture of the household.
Income may play a strategic factor in deciding whether or not one spouse should file. Even if one spouse does not file, both spousal incomes must be reported in the bankruptcy filing’s income column. The non-filing spouse’s income can be subtracted from this total if she spends it on herself (i.e., does not contribute to the ‘household expenses’). For example, if one spouse earns $7,000.00 per month but donates $1,000.00 to her parents each month and contributes another $700.00 to a 401k plan, those items are deducted from the overall income. When our office performs hypothetical computations under both circumstances, the difference frequently guides our filing strategy.
Bankruptcy has its own set of rules. They aren’t always logical, but they are usually predictable. In both Chapter 7 and Chapter 13, our firm is familiar with the court’s treatment of asset ownership. We’ll inquire as to who now owns each family asset and whether or not those assets have recently been transferred. Even if the vehicle is titled in our spouse’s name, we frequently drive it assuming it to be “our” vehicle. A married couple’s home may be in the same situation. In order to apply the bankruptcy asset rules to your case, you must first determine who is on the deed to the property.
Many of a household’s assets are untitled. In general, household assets are expected to be split 50/50 between spouses. However, depending on the facts, we may be able to label a significant item as yours or your spouse’s if it was presented as a gift.
Attempts at Collection
The automatic stay on consumer debt is in force for the co-debtor in a Chapter 13 case. This implies that creditors cannot pursue collections against either couple if one spouse files and the other does not, even if they have joint debt and are not paying on it. As a result, the phone calls stop and you get to keep your credit. Not only that, but creditors can’t repossess property or foreclose on your spouse simply because she didn’t file for joint debt.
Until the bankruptcy is over, the automatic stay is in effect. However, once the bankruptcy is over, the creditor can try to collect on those joint debts from the non-filing spouse. Because of the relief provided by bankruptcy, the aim is that you will be able to make payments on that debt at that time.
A Contingency Plan
Another incentive to file for Chapter 13 with one spouse is to have a backup plan in case you can’t make your Chapter 13 payments. If the previous file is dismissed due to non-payment, the non-filing spouse may consider filing a new Chapter 13 in order to obtain creditor relief.
Do not be concerned; contact an attorney.
The good news is that your bankruptcy lawyer will take care of all of these potential stumbling blocks for you, ensuring a smooth bankruptcy filing. Contact us right now to speak with a bankruptcy lawyer.