Falling behind financially can be a rapid or gradual process. Even with two incomes, married couples are potentially at risk of having more expenses and debts than they can manage. Sometimes, job loss or medical emergencies can lead to substantial debt accruing rapidly.
Other times, an imbalanced budget might mean that people slowly accumulate credit card debt over months or multiple years. Eventually, married couples taking stock of their finances may reach the uncomfortable realization that their debt is no longer manageable.
They could be at risk of lawsuits, foreclosure or vehicle repossession attempts. Bankruptcy can limit collection efforts. A successful bankruptcy filing can also lead to the discharge of eligible debts. Married couples have the option of filing individually or jointly for bankruptcy. Which option is typically better?
Every bankruptcy case is unique
Many factors influence the best approach to bankruptcy for a married couple. The type of bankruptcy they intend to pursue can be an important consideration. In a Chapter 7 bankruptcy, spouses filing jointly have to show that their combined income is still low enough for them to pass the means test.
However, the possible option of doubling state bankruptcy exemptions could make filing jointly the best option available. Only state exemptions are available in North Carolina Chapter 7 cases.
Joint filings can also be helpful in Chapter 13 cases. The repayment plan can look at the totality of the family’s income and obligations, rather than each spouse being subject to a different plan.
Filing jointly can potentially save money as well, as spouses can avoid duplicate filing fees and the costs of repeatedly going to court for separate bankruptcy proceedings. Of course, there are drawbacks to filing bankruptcy jointly.
Both spouses take a hit to their credit scores at the same time, and all lines of revolving credit may close at once. In separate filings, spouses could stagger when they begin the process to ensure they have access to credit even during bankruptcy proceedings.
Considering every option can make it easier for spouses to rebuild financially when their debt levels become unsustainable. Either joint or separate bankruptcy proceedings can help those struggling with their financial obligations regain control and improve their budgets to make them sustainable.
