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Does My Spouse Have to File Bankruptcy? What If We Are Considering Divorce?

Posted by attorney Clint Dunaway

It is legally possible for a married person to file bankruptcy individually but there are several issues that you need to be aware of especially if you live in a community property state. Community property laws state that generally speaking whatever is accumulated during marriage—regardless of how it is titled—is owned jointly by both spouses. So for example, if you are married and your wife opens a credit card—in ONLY her name—takes the new credit cart and goes on a shopping spree and racks up $10,000 in debt, guess what? You just became half owner of that new debt! For this reason most couples in Arizona file for bankruptcy jointly. Also, if you were to go down to the Chevy dealership and pay cash for a shiny new Corvette—and only title it in your name—your spouse just became half owner of your new car!

Additionally, all assets of the non-filing spouse must also be included in the bankruptcy. Why does this matter? Well your spouse may own non-exempt assets and they may be subject to confiscation by the bankruptcy court. Non-exempt assets can be a wide variety of “things" both tangible and intangible. A non-exempt asset could be a second home, land, time-share, stocks, bonds, certificate of deposits, motorcycle, or something else. Non-filing spouses and un-exempt assets can be very complex, so come in for a free consultation with one of our bankruptcy attorneys today!

Considering bankruptcy and divorce?

Are you married and considering bankruptcy and divorce? Then you may be wondering if it is better to file bankruptcy and then divorce OR if it is better to file for divorce and then file for bankruptcy. Generally, we recommend that our clients file for bankruptcy and then file for divorce. Why?

One of the benefits to filing for bankruptcy while still married is the cost. The cost for a married to file bankruptcy is the same as it is for a single person. Meaning that if you wait until you are divorced to file bankruptcy, both you and your ex-spouse will have to pay the full cost of the bankruptcy plus separate ($306) filing fees to the bankruptcy court.

Another benefit to filing bankruptcy while you are still married is that you will have a clean slate once you are divorced. If you file bankruptcy first, then all of your debts will be discharged. Then when you file for divorce there won’t be any debts that the judge has to split between you and your ex-spouse. Alternatively, if you and your spouse decide to get a divorce and then file for bankruptcy the family court judge will have to split the debts between you two. And what if after the bankruptcy your ex-spouse stops paying on their portion of the debt and doesn’t file for bankruptcy? It just makes a cleaner break if you file bankruptcy and then file for divorce.

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