When debt becomes overwhelming, bankruptcy offers a fresh start for many individuals and families. But if you are married, you might wonder if both spouses have to file bankruptcy together. Under U.S. bankruptcy law, a married individual has the right to file for bankruptcy alone or jointly with their partner. Deciding which path to take depends on how you own your debts and assets, your financial goals, and the laws that apply in your state.
Individual versus joint filing
Because New Jersey is a common law state, you keep debt and asset ownership separate unless you clearly share them. Here are the key differences between individual and joint filing.
Filing individually (one spouse):
- Credit protection: A bankruptcy filing generally appears only on the filing spouse’s credit report, although joint debts may still affect the non-filing spouse.
- Asset safeguards: Property owned solely by the non-filing spouse may, in some circumstances, be outside the bankruptcy estate, depending on applicable law and the facts of the case.
- The joint debt warning: A discharge generally eliminates the filing spouse’s personal liability for qualifying debts but does not eliminate the non-filing spouse’s liability on joint debts.
Filing jointly (both spouses):
- Potentially broader relief: Erases qualifying individual debts for both partners as well as all shared liabilities, subject to the requirements and limitations of the Bankruptcy Code.
- Cost-effective: Requires only one court filing fee and typically lower overall legal fees than two separate cases.
- Double exemptions: Allows married couples to jointly file to claim double exemptions, potentially protecting a greater amount of shared assets.
If debt belongs to one person, that spouse can file individually without dragging their partner into bankruptcy. However, if the account was opened jointly or co-signed, creditors can still pursue the non-filing spouse for 100% of the remaining balance.
Making the right choices
The best bankruptcy option for you usually depends on how much debt you share with your spouse versus how much you owe on your own. Seeking the guidance of a skilled bankruptcy attorney could help you understand your legal options and protect your financial future.