Yes. A married person can file for bankruptcy alone without their spouse joining the case. The question isn't whether you can, but whether you should. When only one spouse files, the bankruptcy will focus on that spouse’s eligible debts, income, and assets, while the non-filing spouse’s separate debts generally stay outside the case. However, joint debts, community property rules, and how you own major assets like your home or car can still affect both spouses, even when only one files.
If you are married and considering bankruptcy, it's important to understand:
- Whether filing together or separately offers better protection
- When a one-spouse bankruptcy makes sense
- What happens to joint credit cards, medical bills, and loans
- How community property versus common-law rules treat shared assets
Below are a few things to consider, but remember that state laws vary, as do your individual circumstances, so it's always a good idea to check with a bankruptcy lawyer in your state to determine if filing alone or together is the better option.
The Basics
Generally, bankruptcy allows a person, business, or married couple to address overwhelming debt either by using a Chapter 7 liquidation to wipe out qualifying unsecured debts or by entering into a Chapter 13 repayment plan over three to five years, subject to eligibility rules and important exceptions. Because there are income-based and other requirements, bankruptcy is not available to everyone, and a married couple may find that only one spouse qualifies or needs to file.
If only one spouse files, the non-filing spouse needs to understand how the bankruptcy may affect joint debts and shared property.
What Happens to Joint Debts?
What happens to joint debt in bankruptcy depends on state law and can vary significantly. Generally, however, bankruptcy does not eliminate joint debt when only one spouse files.
In common-law states, an individual filing typically affects only that spouse’s separate debts and their share of any joint obligations. The non-filing spouse’s individual debts are not part of the case, and creditors may continue to collect on joint debts from the non-filing spouse.
- Example: You live in a common-law state such as Georgia and your spouse files for bankruptcy alone to wipe out credit card debt. The cards that are only in your spouse’s name may be discharged. But if you share a joint credit card, your spouse’s obligation can be erased while you still owe the full balance, and the credit card company can keep pursuing you for payment.
In community property states, debts taken on during the marriage are generally treated as community debts. If one spouse files for bankruptcy, creditors usually cannot use community property to collect debts, but they may still pursue the non-filing spouse’s separate property and personal credit for those joint obligations.
- Example: You live in a community property state such as California. Your spouse has significant medical debt and files for bankruptcy alone. Because most property acquired during the marriage is treated as community property, creditors generally cannot use joint property, such as your home, to collect that discharged debt. However, if you have a separate bank account funded by an inheritance that belongs only to you and you do not file for bankruptcy, creditors may still be able to pursue that separate account.
Because joint debts and state property rules can drastically change the impact of a one-spouse filing, it is critical for both spouses to understand what debts are in whose name, and whether they live in a community property or common-law state.
Can Jointly Held Property Be Liquidated?
How assets are treated in bankruptcy depends in part on whether you live in a community property state or a common-law state and on whether the property is exempt.
In community property states, earnings and most property acquired during the marriage are considered community property, regardless of which spouse holds title. When one spouse files for bankruptcy, all nonexempt community property generally becomes part of the bankruptcy estate. The trustee can sell nonexempt community property to pay creditors, even if only one spouse filed for bankruptcy, and regardless of which spouse incurred the debts.
- Example: You live in a community property state such as Texas. You bought a house before marriage, and you and your spouse have lived in it throughout the marriage and made mortgage payments using income earned during the marriage. You are behind on mortgage payments, and your spouse files for bankruptcy alone. Depending on how the home is classified under state law, its value and the available exemptions, the house may still be treated as part of the bankruptcy estate, and nonexempt equity could be sold to pay creditors.
In common-law states, ownership is based more on title and who actually owns the asset. Only the filing spouse’s ownership share becomes part of the bankruptcy estate. If a jointly owned asset cannot reasonably be divided, the Chapter 7 trustee may sell the entire asset, pay the non-filing spouse their share of the proceeds, and then use the filing spouse’s share to pay creditors. The non-filing spouse’s ownership interest is preserved, but the filing spouse’s portion of the value can be used to satisfy bankruptcy debts.
- Example: You live in a common-law state such as New York. You own a car jointly with your spouse, with each of you listed as a co-owner on the title. Your spouse files for Chapter 7 bankruptcy, and their share of the car is not fully covered by exemptions. The trustee might sell the car, pay you your share of the proceeds, and use your spouse’s share to pay creditors. You do not lose the value of your ownership interest, but you may lose the vehicle itself because your spouse’s portion is part of the bankruptcy estate.
Exemption laws in each state may protect some equity in a home, a vehicle, household goods, and other property. Whether and how those exemptions apply to jointly owned or community property is another reason to get individualized legal advice from a bankruptcy lawyer.
Should Both Spouses File Together?
Whether filing jointly or alone for bankruptcy is better depends on a lot of variables. In some situations, filing jointly allows both spouses to discharge their separate and joint debts in a single case and may simplify the handling of jointly owned property. In other situations, it may be strategically better for only the spouse with the most debt to file.
Factors include:
- How much debt is in each spouse’s name
- Whether most debts are joint or individual
- Whether you live in a community property or common-law state
- What assets you own together and separately
A bankruptcy attorney can help you weigh whether a joint filing or an individual filing makes more sense for your household.
