Do married couples both have to file for bankruptcy?
No, both husband and wife are not required to file for bankruptcy. Just because your spouse has filed bankruptcy, it does not mean that you have to as well. However, if you and your spouse have incurred joint debts, the bankruptcy of one spouse will not eliminate the joint debt. It will be necessary for both spouses to file in order to completely eliminate debt you and your spouse have incurred in both your names.
Conversely, if one spouse has a lot of individual debt and the other has very little, the indebted spouse can file bankruptcy and obtain relief without damaging the other spouse’s credit.
The situation is different when a married couple has incurred debt jointly or when one spouse has co-signed for the debts of the other. In this case, the married couple will have to file jointly in order to get complete relief from their debts. Any debts you incur in your own name are yours and yours alone. Assuming the debts are dischargeable, filing a bankruptcy case will wipe out your legal obligation to pay those debts. However, the obligations of co-borrowers will remain because the focus for bankruptcy purposes is only on the person actually filing.
In a joint debt or co-signer situation, lenders have two avenues of collection. They can proceed against either borrower in the joint debt scenario or against the co-signer in the event the primary borrower defaults under the terms of the loan. In order to relieve both spouse’s obligation for jointly held debts, both spouses will have to file bankruptcy.
For example, if a married couple incurred a significant amount of credit card debt that they can no longer keep up with and only the husband files bankruptcy, the wife would still be legally obligated to pay the debt even after completion of the husband’s case. When debt is jointly held, it is advisable for a married couple to file jointly. If you have questions, contact a knowledgable bankruptcy attorney in your area.