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Can I file bankruptcy without my wife? Can I file bankruptcy without my husband?

By David Leibowitz, Illinois and Wisconsin Bankruptcy

People frequently ask  whether they can file a bankruptcy case without their spouse.

The simple answer is yes.  The complicated answer is that your spouse matters for several reasons.

Let’s assume that you and your spouse are married and living together.  Then you have one household. There are at least two of you and maybe more in your household.  If that’s the case, your spouse’s earnings count and must be considered to determine if you are eligible to file a chapter 7 case – straight liquidation – or whether you must file a chapter 13 debt adjustment case – along with payments to creditors for up to 5 years.

A married person must take into account his or her spouse’s income.  Of course, the spouse’s separate expenses, like personal credit card bills, are deducted.  But anything left over is considered disposable income which is placed to  household uses and therefor available, at least in theory, to pay the filing spouse’s debts.  If the non filing spouse makes enough money, then the filing spouse may be required to file a chapter 13 case or run the risk of having his or her chapter 7 case be subject to a motion to dismiss as abusive.

If you are married and living separately, you probably won’t have to include your non-filing spouse’s income.  Each of you now has your own household.  If you are married but estranged, you may be deemed to have separate households even if you live in the same dwelling.

The issue becomes more complex in community property states like Wisconsin or California, for example.  In such states, debts arising during marriage are typically considered community debts and property acquired during marriage is considered community property.  Community property can be subject to bankruptcy administration even if one of the spouses does not file jointly with the other.  On the other hand, the non-filing spouse benefits from the discharge of the filing spouse. That’s because if one spouse is discharged from a community debt, the other spouse is automatically discharged from that debt – this is called a “phantom discharge.”

So if you are married but are thinking of filing bankruptcy separately, ask a bankruptcy lawyer who understands marital law what this means to you and your non-filing spouse.

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Full post as published by Bankruptcy Law Network on January 06, 2011 (boomark / email).