What if one of a married couple needs to file for bankruptcy? Can she? I use the feminine here because in my experience it is often a wife who needs to take this step. Why would one spouse file a bankruptcy and not the other? Common reasons are:
- The spouse has a prior bankruptcy filing within the past 8 years
- One just has no debt
- The spouse has religious objections to bankruptcy
- The spouse otherwise doesn’t believe in bankruptcy
- The spouse is a miser and will not share his wealth, even for a wife or child, even if the debt is for HIS household
- The spouse has assets free and clear which are at risk in bankruptcy.
- Each maintains separate financial lives
- One will leave the other if he has to file bankruptcy over your bills (feel victimized?)
- The list goes on…
The fact is that it is very common for one of a married couple to file for bankruptcy and not the other. Even the bankruptcy petition provides right on the first page for a married individual to file alone. My first appointment this morning involved such a situation. The Husband does not believe he needs one, but the wife who pays her own bills just had a big cut in hours at work. This man is being very supportive of his wife’s decision. She tried debt management (bad) but the counselor told her to find a bankruptcy lawyer. In her case the husband is helping her pay her legal bill.
Many spouses are not so supportive. They often expect others to live by their example. That is just not reality. I think they take pleasure in seeing their partner suffer for a perceived lack of money smarts. They look at bankruptcy as the punishment for an unexamined life. If you are married to one of these you know what I am talking about.
Single Bankruptcy, Joint Budget
A single bankruptcy for a married couple is a lot of ways like a joint filing. Unless you are separated both incomes are reported on Schedule I of the petition. Likewise both incomes are reported on the means test (form 22). Schedule J contains “household expenses.” This can include his monthly bills, including car payments, payments on credit cards, and payments for other unsecured debt. These items can also be included on the means test. Although the spouse’s income and expense information appears he is not identified in the petition unless you both are cosigners for any bills. In that case his name and address will be listed on the schedule for codebtors.
Single Bankruptcy, Joint Discipline, One Discharge?
In a chapter 13 case the plan payment is determined by an analysis of the schedules which is called the good faith test and through the means test. Even if only one of you files the plan is based on total household income and total household expenses. In essence he is subject to the sacrifice and tight budget of the chapter 13, why not reap the rewards? Stubbornness, was it ever a virtue?
Picture by iStockPhoto.com