When Married Couples Face Financial Crisis: The Critical Decision Between Joint and Individual Bankruptcy Filing in New York

When overwhelming debt threatens a marriage, New York couples face a crucial decision that could impact their financial future for years to come. Should both spouses file for bankruptcy together, or is it better for just one spouse to file individually? This choice affects everything from how much debt gets discharged to which assets you can protect, making it one of the most important decisions in the bankruptcy process.

Understanding Your Filing Options

Married couples can choose whether to file for bankruptcy jointly (together) or individually. Married couples can file together in a joint bankruptcy that combines the spouses’ property and debts into the same case. Although filing a joint bankruptcy is often the right move, spouses aren’t required to file as a unit.

If a couple wants to file for bankruptcy, they can make the process more efficient by filing a joint petition rather than filing individually. The papers included in the joint petition will cover all of the spouses’ assets and income, as well as their total debts and expenses.

The Advantages of Filing Jointly

The most obvious advantage of pursuing joint bankruptcy as a married couple is the reduction in costs and time. You will pay the same filing fee as a couple that you would as an individual, so filing jointly would cut these costs in half. Any other fees related to the proceedings, such as attorney fees, also would be halved.

Both spouses can wipe out qualifying debt in one fell swoop when filing together, including debts they incurred as a married couple and individual bills they’re each solely responsible for paying. Joint bankruptcy also can be a more thorough way of discharging debts. If only one spouse files, while the other spouse does not, the spouse who does not may still be on the hook for their portion of any debts owed by the couple together.

For New York couples, joint filing offers another significant advantage: In many cases, married filers can double the exemption amount when filing together when they both own the property. Married couples filing jointly can double the exemption, meaning a couple in New York City could protect up to $359,950 in home equity.

When Individual Filing Makes Sense

Despite the advantages of joint filing, there are situations where individual bankruptcy filing is the better choice. One of you has most or all of the debt, you haven’t acquired any valuable property as a couple, and you married relatively recently. In this situation, filing separately will allow the spouse who isn’t facing debt problems to keep his or her separate property, maintain a good credit rating, and steer clear of the bankruptcy case altogether.

Filing a joint bankruptcy will negatively affect the credit rating of both spouses. It’s often better to preserve one spouse’s good credit so that it’s available after the bankruptcy case.

On the other hand, a joint bankruptcy may not be appropriate if one of the spouses is in a significantly different financial position from the other. For example, one spouse might owe child support arrears and overdue taxes, which must be paid off completely if you file under Chapter 13. The couple might struggle to meet their payments under the plan if they include these debts, so the spouse who owes them may want to file separately.

Important Considerations for New York Couples

Even when filing individually, contrary to common belief, filers must include both spouses’ income in individual bankruptcy. Additionally, even if you file on your own, you will still be required to disclose your marital status, your spouse’s income, and, in most cases, all debts that have been created since you were married.

If a couple has joint debt but only one spouse files for bankruptcy, the non-filing spouse remains fully liable for all of the joint debt. This is a critical consideration that many couples overlook when deciding whether to file jointly or separately.

New York’s Generous Exemption Laws

New York offers particularly favorable bankruptcy exemptions that can influence your filing decision. New York is one of the states that allow filers to choose between New York state exemptions (and federal nonbankruptcy exemptions if you select this option) or federal bankruptcy exemptions.

For homeowners, New York’s homestead exemption is especially generous: A debtor can protect the equity in a house, condominium, co-op, or mobile home used as a residence up to the following values: $204,825 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam counties. So, if a joint bankruptcy petition is filed (by married debtors), and the property is owned by both debtors, then the amount of the exemption is doubled.

Making the Right Decision

Ultimately, your decision will depend on which option allows you to discharge more of your debts and keep more of your property. The complexity of this decision underscores the importance of working with an experienced Bankruptcy attorney New York who can analyze your specific situation and guide you toward the best option.

It is generally advisable to file joint bankruptcy unless combining income renders you ineligible for Chapter 7 bankruptcy. When you attend your initial consultation with us, it is best to bring all financial information for both spouses.

If you have any questions about whether to file jointly or separately, you should talk to an experienced bankruptcy lawyer. As you can see, this decision has important consequences, including how much of your debt will be erased and how much of your property you will get to keep.

Moving Forward

The decision between joint and individual bankruptcy filing is not one to make lightly. Each couple’s situation is unique, involving different debt structures, asset ownership, income levels, and long-term financial goals. What works for one couple may not be appropriate for another.

By carefully evaluating your debts, assets, income, and future plans, you can make an informed decision that sets your family up for the best possible financial fresh start. Remember that bankruptcy is designed to provide relief and a new beginning, not to strip away everything you’ve worked for. With proper planning and professional guidance, you can navigate this challenging time and emerge with your financial future intact.