If you're married and considering filing for bankruptcy, there are a few extra things you should consider. Like most other major financial decisions, a bankruptcy while married necessarily involves your spouse even if you're considering doing it on your own. Here's what you should know before you file.
Filing for bankruptcy while married is similar to filing your taxes while married in that you can do it jointly or separately. Which one you should choose depends on what kinds of debts you have.
As a general rule, you want to file for bankruptcy on your own if your debts are individual debts. This would almost always be from debts that you had before marriage. Once you're married, even a credit card in one spouse's name could be the responsibility of both spouses. It's important to get this right because if only one spouse files for bankruptcy, the other spouse is still responsible for any joint debts.
For debts you incurred while married, you will typically want to file for bankruptcy together so that you both receive protections against collections on those debts.
Bankruptcy is generally a matter of federal law, but there are a few areas that state law controls. One of the most basic Florida bankruptcy laws is that certain exemptions for assets that do not need to be included in your bankruptcy are doubled for married couples.
The most important difference in Florida is that it is not a community property state. This means that certain debts incurred during a marriage by one spouse may not be a marital obligation but instead an individual obligation. This will vary based on what the debt was for (marital purpose vs. individual purpose) and what type of contract you signed.
Keep in mind that community property is advantageous to creditors, because it gives them two people to collect from, so most creditors will try to structure their contracts to make a debt community debt. If you wish to exclude a debt incurred during your marriage from your marital obligations, you may need a bankruptcy lawyer to review how it was structured.
To file for bankruptcy in Florida, you need to go to the federal bankruptcy court. There are locations throughout the state in each of Florida's four federal court districts. You cannot file for bankruptcy in a state or county court even if the closest federal court is an hour or two away.
You can file for Chapter 13 bankruptcy without including your spouse or obtaining your spouse's consent. In this situation, only your own personal obligations would be discharged, and your spouse would not receive any bankruptcy protections or rights.
The one important difference between filing for Chapter 13 bankruptcy as a single person and as a married person is that you must include your total household income. This includes your spouse's income, even if they are not on the bankruptcy claim and even if you file your taxes separately. This will typically result in higher monthly payments than if you were not married.
Depending on how you handle your marital finances, you may need to involve your spouse in how the monthly payments are made to ensure that you have sufficient funds available. Your spouse refusing to contribute generally will not change your required payment.
Just like you have the right to individually file for bankruptcy while married, you can also file for bankruptcy during a separation. As usual, only your own individual obligations would be discharged in this scenario. In addition, you generally cannot include divorce obligations to your spouse in a bankruptcy.
Keep in mind that how you resolve your bankruptcy could impact how a family court allocates your equitable distribution during divorce. For example, if you file for a liquidation bankruptcy to pay off individual debts just before divorce, your spouse could receive a larger share of the remaining assets rather than having their share reduced by your personal bankruptcy. You should work with both a family law and bankruptcy law attorney to properly plan this type of bankruptcy.
If you have a personal bankruptcy when married, your spouse is generally excluded from the process by law. Of course, your marriage may be affected by things such as your credit score being needed for a mortgage application and how any debt payments are made. You may wish to seek relationship advice from a qualified professional about how to handle the non-legal aspects of this situation. You'll also want to ask a bankruptcy lawyer how to ensure your spouse is legally protected from your creditors and how to avoid making individual debts marital debts.
Whether you want to file for bankruptcy on your own or with your spouse and whether your marriage is doing great or about to end, filing for bankruptcy when married makes things significantly more complex. To protect both spouses and to discharge your debts in the most efficient way possible, schedule a consultation with an experienced bankruptcy lawyer to decide the best way to proceed in your unique situation.