Do my wife and I both have to file bankruptcy?

Do my wife and I both have to file for bankruptcy?

Well, for starters, no one has to file for bankruptcy, however, if you and your spouse are seeking relief from debts you have incurred together, the answer is likely yes, you’ll both need to file in order to get out from under your debts. It is important to understand that bankruptcy only eliminates the debts of the actual party who files. When there is joint debt, a bankruptcy filing by only one spouse will leave the other spouse owing all of the debts. To eliminate marital debts, both husband and wife need to file.

Examples of Joint Debt

Let’s say that, due to a recent job loss, you and your wife were forced to use a joint credit card to get by until another job came around. Unfortunately, that next job has yet to appear and the credit card balances have spun out of control. Making payments became impossible months ago and now the credit card company is suing you and your wife. The accounts have both you and your wife’s name on them.

If you, as the husband, file for bankruptcy, you will no longer be obligated to pay the credit card company as the bankruptcy will wipe out your unsecured debts (medical bills, credit cards). However, this won’t do you much good as your wife will still be obligated to pay the debt. That’s right, the credit card company can still come after her for the entire amount due on your joint credit card account. The rule is fairly simple: to get rid of joint debt, both spouses need to file bankruptcy.

The same rule applies to an underwater mortgage in which both husband and wife are named on the mortgage. If only one spouse files bankruptcy and surrenders the home, the non-filing spouse will still remain personally liable for the mortgage debt and could be sued for a deficiency judgment.

If you are considering bankruptcy, consult an attorney.