There is no requirement that a married couple file jointly for bankruptcy. Both spouses can file for bankruptcy separately or jointly, and they need not file bankruptcy at the same time. Some of our clients choose for one spouse to file bankruptcy, usually in cases where the filing spouse is liable for most of the debts, or when the non-filing spouse has excellent credit to protect. The analysis below attempts to cover some of the major legal issues that apply to discharge in the marital bankruptcy context. Additionally, this analysis will focus only on bankruptcy effects in community property states, like California.
The general rule in community property states regarding spousal liability for debts is that any debts accumulated during the marriage are the debts of both spouses, regardless of whether only one spouse signed the agreement. Debts that were incurred prior to the marriage are generally the separate debts of the spouse who originally incurred them.
Given the general rule, most debts accumulated during marriage are debts of both spouses, whereas most debts accumulated before marriage are debts of one spouse. In situations where only one spouse is liable for the debt, it generally does not make sense for the other spouse to declare bankruptcy to remove a debt for which he or she is not liable. However, in situations where both spouses are liable for the debt, the analysis is much more complex, and an attorney should be consulted. If both spouses are liable for a debt (called a “community debt”), then both spouses must file for bankruptcy or the non-filing spouse will still be liable for the debt. However, because all of the filing spouse’s property is still community property and the filing spouse’s discharge prevents creditor attachment to the community estate, it is possible that all community property (including all property of the filing spouse and the non-filing spouse) may be protected by only the bankruptcy of the filing spouse. In other words, the filing of one spouse may protect all community property, including the community property of both spouses, as long as the community exists (the spouses remain married). However, the separate property of the non-filing spouse can still be targeted by creditors, and should the spouses later divorce, no property of the non-filing spouse would be protected as the community estate would cease to exist. If the above situation applies to your case, it is highly recommended that you contact Nova Law Group and seek the advice of an attorney, as the law in this area is quite complex.
