What to know about separate versus joint bankruptcy filings

The decision to file bankruptcy is not often easy. And that decision could be even more stressful for married couples. Fortunately, married couples have two possibilities to consider when weighing their choices.

Couples can file separately

If only one spouse needs relief from debt, they have the option to file bankruptcy on their own. A separate bankruptcy filing should not impact the other spouse's finances, including their credit score or other loans. 

Separate debts often remain individual. However, there are two critical things to remember about filing separately:

  • Shared income: Since married couples often share finances, the other spouse's income could impact the filing spouse's means test. The amount of income could affect whether an individual files Chapter 7 or Chapter 13 bankruptcy.
  • Community property: Under New Mexico's community property laws, married couples share ownership of any assets they collect during the marriage. So, even if a spouse files bankruptcy separately, the couple's joint property could still be a part of the bankruptcy estate.

Filing bankruptcy jointly is also an option

A couple can file bankruptcy jointly if they have shared debts. Shared debts often include mortgages or car loans that married couples sign together. Filing jointly usually allows couples to reduce costs and most debts owed in the marriage.

The state community property laws still come into play in a joint filing, but they may not complicate the situation like they would in a separate filing. It is also possible for married couples to double their exemptions in a joint bankruptcy filing. 

The decision depends on the circumstances

Like most bankruptcy situations, the choice of how to file often revolves around personal circumstances. Couples may want to consider the type of property they own separately and jointly, as well as what kinds of debt each spouse owes when determining their filing strategy.

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