Can I File Chapter 13 Without My Spouse In Pennsylvania?
Individual consumers must always file a bankruptcy case in their name only, while married couples have the option to file a case jointly. However, this is not a requirement, and in some cases, it may not be advantageous to do so. Often times, only one spouse may have outstanding debt to deal with, while the other has an exceptional credit history, in which case it would be best to file only in one person’s name. The nature of the outstanding debt and other considerations for why they are filing will have to be reviewed in detail so both spouses know what to expect from the bankruptcy process and to ultimately make the decision on whether or not the case should be filed individually or jointly. The bankruptcy lawyers at Young, Marr & Associates will discuss the process of filing for Chapter 13 bankruptcy without a spouse and the how filing for bankruptcy can affect your spouse. For a free consultation with an experienced Bucks County bankruptcy attorney, call us today at (215) 701-6519.
How Filing for Bankruptcy Can Affect Your Spouse in Pennsylvania
Often, the main concern of a non-filing spouse, or any co-signer for that matter, is the potential effect on their own credit score & credit history. While they won’t have a bankruptcy filing appear on their credit report, any accounts that are joint with the bankruptcy filer may appear as accounts “in bankruptcy.” The problem here is that creditors, as a result of a bankruptcy filing, have to take several steps to avoid any collection action against the person who filed. This includes changing the status of the account with the credit reporting agencies, as traditional negative reporting for late payments and delinquent accounts is considered “collection action.” Therefore, the creditor will report the account as in bankruptcy, and this, unfortunately, appears on the non-filing spouse or co-signer’s credit report as well. However, it is only the account itself that could potentially be reported in this manner, and not the non-filing spouse or co-signer’s entire credit report.
While credit reporting is the main concern for a lot of filers, it is even more important to consider is what name the debt is in, or in other words, is just one spouse responsible to pay off a debt, or are both of them? For unsecured debt, such as personal loans and credit cards, a bankruptcy discharge only gets rid of the debt for the person that filed the bankruptcy case. This means any co-signers (or co-debtors as you will see in your bankruptcy case) will still be responsible for paying the full balance owed on any debt that is also in their name. This does not apply to married couples only. Rather, any instance in which there are two people signed on a loan, married or not, the non-bankruptcy filer would still be responsible for paying that debt back. While the individual filing for bankruptcy can get rid of the debt, the co-debtor would be on the hook for the full amount owed, unless they filed their own bankruptcy case.
What Information Does a Spouse Have to Provide for My Bankruptcy Filing?
Potential filers should know that while their spouse doesn’t have to file, it will still be necessary to obtain information from their spouse, such as proof of their income. While Bankruptcy court will let you file by yourself if you’re married, they will still want to see “the whole family picture.” This means that your spouse’s income will be used to determine your disposable income if any, and potentially your Chapter 13 Plan payment amount as well. So if your spouse does have any outstanding debt and would benefit from joining you in a Chapter 13 bankruptcy case, it may be better to file as a married couple, since both incomes will be used to determine what each individual has to pay back anyways.
However, not filing jointly allows for some additional maneuvering in determining how much “disposable income” a debtor ultimately has when they are married. Depending on the household income level, it may be advantageous to have one person in a married couple file individually, as the non-filing spouse’s individual expenses can then be used to try and reduce the total disposable income available to pay towards outstanding debt. For example, in a Chapter 13 filing where the filer not only has past due mortgage payments but also credit card debt outstanding in just their name, they may have to pay a portion, or sometimes all of the credit card debt back as well in their Chapter 13 repayment plan as a result of their total household disposable income. However, if the non-filing spouse has their own credit card debt, but is not filing bankruptcy to resolve it, the minimum payments owed on those credit cards can be used as an expense to reduce the disposable income for the spouse that is filing. This can result in a lower chapter 13 plan payment, and allow the filing spouse to discharge their credit card debt, rather than have to pay it back. The non-filing spouse can list a number of expenses for this purpose, including insurance, car payments, and others.
Mortgage Loans and Chapter 13 Bankruptcy in Pennsylvania
Another consideration, especially in Chapter 13 cases, relates to mortgage loans and who is the responsible party. If a married couple owns a home jointly, and are both on the mortgage loan, it is not always necessary to have both of them file a joint case. When filing bankruptcy to stop foreclosure, just one of the spouses in a married couple will get the full protection bankruptcy provides to filers, which stops any foreclosure sales, as well as any other collection action taken by creditors. This protection that stops the sheriff sale still gets put in place with just one spouse filing, and they can still set up a Chapter 13 Plan payment to pay back their past due mortgage payments, all the while protecting both themselves and their spouse from foreclosure.
Strategically, it can also be beneficial to have just one spouse file in case the other spouse needs to file later on for another reason. While every step is taken to ensure successful cases for our clients, sometimes unforeseen circumstances prevent that from happening, such as a sudden medical emergency or expensive car repair, resulting in expenses that might make affording your chapter 13 plan payments and mortgage payments difficult for a period of time. If a case gets dismissed for non-payment or any other reason, and if the filer is not in a position to reinstate the case, they may instead decide to refile a whole new case and start over. However, doing this is not something that bankruptcy court takes lightly, and the protection given to bankruptcy filers is reduced in cases where people file multiple times within a year, and in some cases, no protection is granted at all. Furthermore, if the court determines that the multiple filings constitutes abuse of the bankruptcy system, they can bar a person from filing any new bankruptcy cases for either a fixed period of time, such as the next two years or even bar them for life. In such situation, a potential filer would need to ask that same court that barred them from filing, for permission to even file a new case based on a significant change in their situation. However, all of this could be avoided if a husband and wife strategically filed individually. With one case being filed, the other non-filing spouse retains their ability to file their own case if the first spouse’s case fails to be completed successfully for any reason. This separate filing grants the same protection to stop sheriff sales or other collection action for the newly filed spouse, without compounding filings on just one person in the couple.
Pennsylvania Bankruptcy Lawyers Offering Free Consultations
There are many considerations, advantages, and disadvantages that may arise when a married couple decides to file a bankruptcy either jointly or individually. It is best to discuss your specific situation and ultimate financial goals with an experienced bankruptcy attorney that can ensure you and your spouse are making the best possible decision for your circumstances. For a free consultation with a Philadelphia bankruptcy lawyer at Young, Marr & Associates, call us at (215) 701-6519.