The Latest Facts on Joint Bankruptcy Filing

When you and your spouse file a joint bankruptcy petition, you can save a great deal of time and money. Here’s how joint bankruptcy works and things you should consider before you and your spouse file jointly. In a joint bankruptcy filing, you and your spouse file one set of documents with the bankruptcy court. These documents contain complete information about your and your spouse’s income, expenses, debts and assets. Debts: You and your spouse must list all debts. These include both individual debts that each of you owe, and debts that both of you owe together.

Single Joint Bankruptcy: One joint bankruptcy can erase both spouses’ dischargeable debts. This eliminates the need to file two separate, individual bankruptcies.

Note, however, that you should first determine whether a joint bankruptcy is the best solution for you. This decision is based on the types of debt you owe and whether the debt is owed individually or jointly.

Bankruptcy’s Effect on Your Assets

In your bankruptcy filing, you must disclose all assets that you and your spouse own. All of your property, including assets that you own individually and those that are owned jointly, are now part of your joint bankruptcy. Note, however, that if the value of your combined assets is greater than the exemptions permitted in bankruptcy, you could encounter problems.

Joint Bankruptcy Exemptions

Some states permit you to use federal bankruptcy exemptions. If you are a resident of one of those states and elect to use federal exemptions, then by filing jointly you and your spouse may double the amount of your exemptions. If you cannot use federal exemptions, or if you decide not to use them, then your state law determines whether you can double your exemptions in a joint bankruptcy filing. Also, if you wish to take a double exemption on one piece of property, then you and your spouse must own that property jointly.

How You Benefit by Filing a Joint Bankruptcy

You Save Money
If you and your spouse file jointly, you save money on filing fees. If you file separately, then you pay two filing fees. Also, if you decide to hire a bankruptcy lawyer, you’ll save money by filing a joint bankruptcy as opposed to two individual bankruptcies.

You Erase All Qualifying Debts
If you file for bankruptcy and your spouse does not, then the non-filing spouse is still liable for his or her share of any joint debts, as well as that spouse’s individual debts. If both spouses filed jointly, then you could erase all dischargeable debts owed by you and your spouse.

You Save Time
Each bankruptcy filing requires the person to provide in-depth financial documents and attend a minimum of one hearing with the bankruptcy trustee. So if you file individually, you will be required to provide documents and attend hearings. Your spouse will have to do the same. However, if you file jointly, then you and your spouse compile only one set of documents and attend hearings together.

How You Lose by Filing a Joint Bankruptcy

You May Lose Exemptions
In a joint bankruptcy, if one spouse owns too much separate property, then you may not be able to exempt all of the spouses’ combined assets. If this is the case, then it might benefit the spouse with lower-value assets to file an individual bankruptcy. Then the non-filing spouse’s separate property will not be included in the bankruptcy.

You Must Pay Priority Debts in Full

If one spouse owes too much priority debt – such as taxes and family support payments – then a joint Chapter 13 bankruptcy filing will require that those obligations be paid in full, even if the other spouse does not owe the debt. This could result in very high plan payments. In this case, if the spouses’ income is not enough to make those payments, it may be better for the spouses to file individual bankruptcies.

If are in debt and are considering filing for bankruptcy in Illinois, please give me a call. As a long-time Chicago bankruptcy lawyer, I can advise you on all aspects of Illinois bankruptcy law, and whether filing jointly for bankruptcy is right for you.