Deciding when the best time to file for bankruptcy can be a very difficult issue for couples. Especially for couples who are planning to be married. While married couples can still file for bankruptcy jointly and/or separately, being married can make it more difficult to qualify for the bankruptcy chapter you wish to file.
Filing a joint bankruptcy is normally a more convenient process as it allows a couple to wipe out their debts together in a single bankruptcy. This means the couple will not have to attend separate hearings. A joint filing will save the couple money on court costs, as the filing fees are the same for an individual or joint bankruptcy. And attorneys will also charge less for a joint bankruptcy filing than if the attorney was filing two separate bankruptcy petitions.
However, filing a joint bankruptcy may not always be in the best interests of the couple depending on the couple’s income, assets, and debts. Once a couple gets married, they may have a more difficult time qualifying for a Chapter 7 Bankruptcy.
To qualify for a Chapter 7 Bankruptcy a person, or married couple, must pass a means test. This test compares a person’s income against the median income of a similar household in that person’s state. If a couple is married they must include both spouse’s income on the means test, regardless of whether each spouse is filing. Unfortunately, the median income of a two-person household is not twice that of a single household. This means that even if both spouses qualify for a Chapter 7 Bankruptcy separately, they may not be able to qualify if they are married. In Florida, the difference in the means test between a single household and a two-person household is less than $10,000.00.
Filing a joint bankruptcy may also not be a good idea when only one spouse has debt. If one spouse has significant debt, he/she can file for bankruptcy separately from their spouse. However, the other spouse will need to still disclose his or her income for the means test, but the non-filing spouse’s individual property will not be a part of bankruptcy estate. All property that is jointly owned must be included in the bankruptcy. One exception to this rule is if a person lives in a community property state. In these states, such as Texas, a person must include all the assets of the non-filing spouse and the trustee will determine which assets to include in the bankruptcy estate. Florida is not a community property state.
For more information on when to file bankruptcy as a couple, please contact the Law Office of David Goldman PLLC today at 904- 685- 1200.