Joint versus Individual Bankruptcy

Numerous married couples every year get stumped by whether to file separately or together when it comes to looking into the possibility of filing for bankruptcy. Every couple is a different situation, and therefore the choice will vary because on a number of different factors, including the amount of community debt between the spouses, if the property is owned jointly, and the total sum of current debt that was accumulated by one of the spouses prior to getting married.

Filing for joint bankruptcy will get rid of a majority of separate debt that has been accumulated by either of the spouses because they are now considered a joint debt. When this occurs, it is possible that one of the spouses may feel as though they are holding most of the burden of debt. All assets will be considered joint ownership as well, so there will be no division of any assets. This can be extremely problematic if down the road, the couple chooses to separate.

Filing separately for bankruptcy will treat debt liabilities independently. This means that each spouse will be held accountable for debts accumulated prior to getting married and debts they acquired in their own accounts while married. If one spouse is currently having difficulties paying off debts acquired before the marriage, separate filing is a much better option as it saves the other spouse from the possibility of credit damage. However, separate filing can cause problems when there are joint accounts as both spouses sign a contract regarding liability over the joint account. The bankruptcy court will determine the spouse to be held liable. As well, when one spouse files for bankruptcy, the other spouse is left to deal with joint debt.