Financial decisions in your single life may have only impacted your own interests, but the situation is entirely different once you are married. Your obligations are dedicated equally to your spouse’s interests with respect to assets, debts, and related decisions. Unfortunately, married couples can fall behind on bills and struggle with debt, just like individuals. You face an uphill battle trying to pay down your debt, but your combined income will only cover interest and late fees. The toll on your marriage can be devastating, which is where filing for bankruptcy can provide relief.

When there seems to be no way out from debt, spouses may need to consider bankruptcy to set the foundation for a better future. Married couples who are dealing with financial difficulties have many choices to face with bankruptcy options, including whether Chapter 7 or Chapter 13 is a suitable fit. However, one of the most critical factors to consider early on is whether to file jointly or individually.

In practice, bankruptcy, even for one spouse, could improve the financial situation for both. Still, it is common to file jointly when you can take full advantage of the benefits. You can count on an Athens, GA, bankruptcy lawyer to advise you on whether a joint or individual case best supports your interests. Plus, you can read on for some background on the pros and cons of filing for bankruptcy as a couple.

Overview of Chapter 7 Bankruptcy 

There are two aspects of Chapter 7 bankruptcy cases that are important for you and your spouse to consider when looking into options:

1. Chapter 7 is discharge bankruptcy, which means that all qualifying, unsecured debts are eliminated at the conclusion of the process.
2. Under Chapter 7, the bankruptcy trustee is allowed to liquidate your assets to pay the debt to creditors. You can protect some assets by using exemptions, which allows you to keep or retain the value. Bankruptcy is intended to help you turn your finances around for the better, not make you needy.

In practice, the bankruptcy trustee may not liquidate assets in many Chapter 7 cases. When the time and effort to sell an asset will not return much in terms of value, the trustee will probably let you keep it.

There are strict eligibility rules to qualify for Chapter 7, and they focus on your income. If your earnings are less than the state median income level, you automatically qualify. Even if you make more than this threshold, you may still qualify under the Means Test. Instead of only reviewing your income, your essential monthly bills are considered. This reduces your earnings to a level that may qualify for Chapter 7.

Chapter 13 Bankruptcy Basics

On one hand, you may only have the option of filing for Chapter 13 bankruptcy if you do not qualify for Chapter 7. With Chapter 13, you do not need to meet income criteria or the Means Test. Conversely, you may opt for Chapter 13 if you have significant assets to protect. There is no liquidation with Chapter 13, so the bankruptcy trustee cannot touch your assets.

You will also be able to discharge qualifying, unsecured debts at the end of a Chapter 13 case, including credit cards, medical debt, personal loans, and lines of credit. However, unlike Chapter 7, you will repay creditors a portion of what you owe through a debt repayment plan. This plan takes all debt and combines it into a monthly payment that is based on what you can afford on your salary. Therefore, the one eligibility rule for Chapter 13 is that you must have a job or other source of income to stay current on the debt repayment plan.

You pay the debt repayment plan for 3 to 5 years, at which point your debts are eliminated. At the end of the plan, you will likely pay a lower amount than the total debt.

Pros of Filing for Bankruptcy as a Couple in Athens

There are numerous reasons that it makes sense to file bankruptcy jointly, whether Chapter 7 or Chapter 13 is the right fit for your situation. The most important part of your strategy is to ensure you are on the same page about your goals and objectives and you both agree to file the appropriate type of bankruptcy together.

• Filing jointly allows the couple to handle all debt as part of a single proceeding. You can use the same Georgia bankruptcy lawyer to represent you, and you will only pay a filing fee for one case. Your costs double if you file separately or if one spouse waits to go through the process. Plus, the proceedings move quicker as compared to filing two separate bankruptcies.
• When you file together as a married couple, you will be able to discharge all debts at the same time. This is true for debts you incurred separately or together. If you file individually, the process does not touch the debt of the spouse who is not a party to the case, so some remain. To give your marriage a clean slate, it is wise to file jointly.
• For many of the exemptions available under Georgia law, the amount doubles for a married couple. For instance, you can protect up to $21,300 of the equity in your home as an individual. When spouses file jointly, they get an exemption of up to $43,000 in home equity.

Cons of Joint Bankruptcy Filing

Filing a joint petition for Chapter 7 or Chapter 13 may not be appropriate in other situations, so you must consult with a Georgia bankruptcy attorney on options. It may be most beneficial for one spouse to file individually while the other stays out of the process or waits. Some of the cons of filing for bankruptcy as a couple include:

• One downside of filing a Chapter 7 case jointly is eligibility. You must both meet the income assessments to qualify. If one person is above the state median income level and does not qualify under the Means Test, you cannot file jointly even if the other does. You may still consider Chapter 13, however.
• There will be impacts on the credit rating for both spouses when filing jointly. A Chapter 7 case remains on your credit report for 10 years, while a Chapter 13 bankruptcy lasts 7 years. If one spouse stays out of the bankruptcy case, their credit score will not be affected.
• Another eligibility issue may be a drawback for filing jointly, and it involves prior bankruptcies. If one spouse recently went through the bankruptcy process, they are not eligible to file again for a certain time period afterward. For instance, if you had debts discharged through Chapter 7, you must wait at least 8 years to file Chapter 7 again. With Chapter 13, the waiting period is 2 years.

Benefits of Bankruptcy in Athens

It is crucial to review the pros and cons of filing bankruptcy as a couple, but you should also check out some of the general benefits that extend to all filers. These will support your financial situation as an individual or a married couple, so consider the following:

• Upon filing your Chapter 7 or Chapter 13 petition, the bankruptcy court imposes an automatic stay on creditor actions to collect. They cannot call, file a debt collection lawsuit, foreclose your home, or garnish your wages.
• With both types of bankruptcy, you must complete credit counseling sessions. Through these classes, you learn a lot about how credit works and responsible ways to manage debt. Counseling helps you avoid getting into financial dire straits in the future.
• You emerge from bankruptcy debt-free and able to get a fresh start. There are some debts you cannot eliminate, such as child support, alimony, and taxes. Plus, bankruptcy does not eliminate your mortgage, which is a debt secured by your home. However, when you eliminate unsecured debt, you have more flexibility to pay these amounts.
• You will no longer face a losing battle with interest fees and late charges.

Steps in the Bankruptcy Process

Before you even begin working on the bankruptcy petition, you and your spouse should consult with a Georgia bankruptcy lawyer about options. You not only have to determine whether filing jointly or individually is best, but you must also decide whether Chapter 7 or Chapter 13 would make the most sense for your financial circumstances. Once these important issues are settled, you can move onto the next steps in the bankruptcy process:

• Collect and organize financial documents, including all paperwork on assets, debts, and income;
• Coordinate with you to attend credit counseling prior to filing bankruptcy;
• Preparing and filing the Chapter 7 or Chapter 13 bankruptcy petition, with schedules;
• Helping you develop a proposed debt repayment plan for Chapter 13, which must be filed with your petition or within 14 days thereafter;
• Working with you on strategies to leverage exemptions and protect your assets;
• Attending the meeting of creditors required for bankruptcy cases, in which creditors will ask you questions about your assets, finances, and the bankruptcy petition; and,
• Wrapping up your case and obtaining the bankruptcy court’s order of discharge.

Discuss Details with an Athens, GA, Bankruptcy Attorney

It is crucial to review the pros and cons of filing for bankruptcy as a couple in Athens, GA, before making important decisions about your financial situation. To learn more about the benefits for your specific circumstances, please get in touch with Morgan & Morgan, Attorneys at Law, P.C. We are happy to schedule a no-cost consultation with a Georgia bankruptcy lawyer who will advise you on details.

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Christopher Ross Morgan

Christopher Ross Morgan

Christopher Ross Morgan focuses on bankruptcy cases, specifically Chapter 7 and Chapter 13 cases. Christopher also takes on Disability and Workers’ Compensation cases. As one of the most accomplished Chapter 7 and Chapter 13 attorneys in Athens, Georgia, he has fought cases through jury trials and argued cases in front of the U.S. District Court, Northern and Middle District of Georgia.