When a couple gets married, they usually enjoin their finances. While some property or assets might be in your individual names, the intermingling of finances can complicate things if you need to file for Chapter 13 bankruptcy. Before making any decisions, ask our team how your marital status might affect an Edison Chapter 13 bankruptcy.
Marital status is taken into consideration when determining whether you should file for Chapter 13 bankruptcy jointly as a married couple or as an individual. A lawyer will need to consider the debtor’s unsecured debts like credit cards, medical bills, and personal loans and determine whether the debts are joint debts or are the debts just in one person’s name. If the debts are only in one spouse’s name, the other spouse might not have to be involved in the Chapter 13 filing.
If a married couple is in arrears on their mortgage that is in both of your names, you can file for one of you to get the benefit of the automatic stay and thus, prevent your mortgage company from foreclosing on your home. A lawyer will also look to see if there are tax debts. If you owe the IRS or the State of New Jersey, did you file joint or separate returns? That decision could impact how you should file the Chapter 13 bankruptcy.
The decision to file jointly or individually could be based on income reasons or whether the debts are jointly held or not. An Edison lawyer determines which option will allow you to deduct more expenses and file a more favorable Plan of Reorganization.
If you filed joint tax returns, then it will make sense for both of you to file for bankruptcy so you can both get the benefit of the discharge at the end of the case. It would make no sense for one spouse to file, get their discharge of any tax debt, only to have the IRS or the State of NJ collect the discharged taxes against the non-filing spouse once the Chapter 13 case is over.
It may make sense to only file Chapter 13 bankruptcy for one spouse because the means test considers the household income and expenses. A non-filing spouse can deduct certain expenses from their income that they would not be allowed to deduct on a Chapter 13 budget.
For example: we may file for the husband and not the wife, but they have a payment on a boat that they want to keep. Generally, the court and the trustee would not allow the couple to keep a boat because it would be considered a luxury item. But if we deduct that boat payment from the wife’s income because she is not filing the bankruptcy, it might be a way to keep the boat if it is registered in both their names. Our lawyers look into these unique factors when meeting with a client and analyze their entire financial situation.
Another way that marital status can impact Chapter 13 bankruptcies in Edison is if one spouse has a large asset that would require everything be paid back if they filed jointly. For example, one of you may be about to inherit money. We would probably not file bankruptcy for that spouse because anything we cannot exempt from that inheritance will need to be paid to creditors. For the spouse who is not receiving the inheritance, filing for bankruptcy could discharge most of their debt.
Many factors can be at play when determining if you need to file for bankruptcy individually or jointly with your spouse. The experienced team at Gillman, Bruton & Capone can ask all the right questions to arrive at the best decision. Please give us a call for a free review to discuss marital status in Edison Chapter 13 bankruptcies.
Gillman, Bruton, Capone Law Group
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