There are many different scenarios that can arise in life that might prompt you to consider bankruptcy. While it may feel embarrassing to do so, there is no shame in filing for bankruptcy, especially since its main purpose is to help people get their finances in order and provide a fresh financial start.
When it comes down to it, some scenarios tend to be more common than others, but they all come with their fair share of questions. One specific situation that requires a lot of consideration when it comes to filing for divorce is whether or not to file for bankruptcy if you have debts and little income but a spouse with a good job.
The answer may vary from situation to situation but there are many things worth considering if this in your case.
For one, filing for bankruptcy might be a good way to protect jointly owned assets from creditors. But it is important to note that your spouse’s income will be considered in a multitude of bankruptcy calculations.
This could make it more difficult to meet the qualifications for Chapter 7 bankruptcy and/or might play a factor in how much you will have to pay unsecured creditors under Chapter 13 bankruptcy.
It can also depend on the laws of your state. Some states make it so your spouse is not liable for debts you incurred individually but there is still the chance that a judgment creditor is able to collect from both your spouse and you. For example, if you jointly own a bank account and both deposit money, like income, into it, then it is susceptible to a judgment creditor to collect from.
In that case, it would be best for you to file for bankruptcy individually if you are eligible. But you can still hit a bit of a snag if you share the same household. This means your spouse’s income is included in various bankruptcy calculations, regardless of you filing individually.
A good rule of thumb is that if you spouse has little or no debts it is usually best for you to file individually. If you end up doing this, you should also be sure to utilize the marital adjustment deduction when filing.
This is something you can use to deduct certain personal expenses of your spouse’s that they pay for with their own separate income and exclude it from their income. This can help you pass the means test for Chapter 7 bankruptcy or lower your disposable income under Chapter 13 bankruptcy.
Again, there are many different options when it comes to filing for bankruptcy for a multitude of different scenarios. Hiring an experienced bankruptcy attorney can help you navigate the options and pick the best one to suit your needs.
The Law Office of Joel R. Spivack can help you make a fresh financial start. Do not waste another moment, call today at 856-488-1200 for a free initial consultation.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney/client relationship. If you are seeking legal advice, please contact our law firm directly.