Do Both Spouses Need to File Bankruptcy Together?
Do both spouses need to file bankruptcy together? The answer to that question is no, they don’t both have to file together. Either one filing will stop a foreclosure, an eviction or a car repossession if they’re both on title to the collateral together. Therefore, there might be reasons where they should both file and there might be reasons were only one should file.
The first thing you have to look at is who is on title to the property because whatever property the debtor has an ownership interest in becomes property of the bankruptcy estate of the debtor once the case is filed. So if the husband is on title to the house alone, the wife filing by herself will not stop the foreclosure because she is not on title to the property, meaning the house is not part of the bankruptcy estate. In that case, the foreclosure can continue.
So what debtors need to determine first is who was on title and will just one filing stop the foreclosure, or do we need both to file this case. Then the next thing you look at is whether one of them filing can essentially cure all the household debts.
If they are both on title, either one filing will save the home, and in a chapter 13, either one filing will allow the household to come up with a plan to pay off the arrears. But the family must also look at other things, like what are their other co-debts. Let’s say that both spouses are on the note, but neither of them have any other debts together. In fact, one of them doesn’t even have any other debts. In this case, there is no great reason for both of them to file, because the filing by either entity would stop the foreclosure and then once you have the fact that the spouse filing stops the foreclosure.
It does not make sense to bring the other party into the filing if the sole goal of saving the home can be accomplished by just that one spouse filing. The debtor or debtors have to pay off the household living expenses no matter how many people file, therefore bringing the other one into the mix really accomplishes nothing.
Debtors need to know that before they just blindly assume that both spouses need to file bankruptcy to stop the foreclosure or garnishment. That’s usually not the case.
Now there might be instances where they should file together, particularly where there is just a ton of debt and leaving the one spouse outside bankruptcy on an island isn’t going to accomplish much because creditors are just going to go after that non-filing spouse. If that happens, that non-filing spouse is not to be able to contribute income to the filing spouse, and then the filing spouse’s plan therefore fails. In that instance, it would make sense to file together so that all creditors actions of collections against the household would be stopped.
You really need to examine those factors before you know all whether the spouses should be filing together. There is no golden rule whether they should or should not, and it is going to be fact specific to their situations.