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When should a Husband and Wife both file Bankruptcy and when should they not?

The question often arises as to when should both spouses file for bankruptcy and when is it best that only one file. There are a number of important items to take into consideration when making this determination. In most cases, it is best that both spouses file. This way, both husband and wife will enjoy the benefits of a bankruptcy discharge and a fresh start. There are times, however, when it is preferable to have only one spouse file, leaving the other spouse outside the protections and limitations of a bankruptcy.

Here are some things to consider in determining the best course of action:

  1. Is most of the debt owed by both spouses or a single spouse. When the majority of debts are owed by both spouses, then both spouses should probably file for bankruptcy. If, however, only one spouse is legally responsible for most of the debt, then it is often better to have the spouse responsible for most of the debt file individually. Also significant is the type of debt. For instance, a secured debt such as a mortgage will have a greater impact than an unsecured debt such as a credit card. In this case, even if one spouse owes the bulk of the debts but both are responsible for mortgage payments, it might be beneficial for both spouses to file bankruptcy to protect their interest in the house.
  2. If a home is involved in the bankruptcy, who owns the home – both spouses or only one spouse? In Pennsylvania, this question is of particular importance. Under Pennsylvania law, a creditor cannot force the sale of a house if the debt belongs to a single spouse. However, this does not apply to cases in which both spouses are on the hook for the same debt.
  3. Similar to No. 2 above, having a single spouse file for bankruptcy might protect property from the reach of creditors. Bankruptcy law provides exemptions of certain property, meaning that such property can be retained by the debtor(s) and is not reachable by creditors. If one spouse has significant non-exempt property, that spouse might be able to protect his or her property by not filing for bankruptcy. Keep in mind, though, that creditors may be able to proceed against non-filing spouses.
  4. If the husband or wife is barred from filing because of a prior bankruptcy, then only the spouse that is not barred will probably be able to file.

This list is not exhaustive, but does provide a starting point when considering how spouses ought to proceed. To flesh out the issues in detail, you should speak to an experienced bankruptcy attorney.

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