Bankruptcy Indiana

Whenever blog readers pose questions that might be of interest to other readers, I highlight those questions in a blog post.  In the last couple of weeks, there have been several questions from married people who want to know if they both have to file bankruptcy at the same time, and if that's the smartest thing for them to do.

When spouses come to see me about filing bankruptcy in Indiana, it's often the case that there are certain debts that are only in the name of either the husband or the wife.  Such debts might even go back to the time before they were married, or the debt might have to do with a business that only one of the spouses owns.  The other spouse may or may not have signed guarantees for those business loans. 

So, your question is one that I hear very frequently in my four bankruptcy law offices around central Indiana. Typically, if the husband is the one who wants to file bankruptcy, he's trying to protect his wife from having to be involved, or the reverse situation, in which the wife is trying to protect her husband.

For starters, a bankruptcy can always be filed by one spouse without the other.  However, there are a few things important to consider first:

1.   As part of the process of qualifying to file bankruptcy, the bankruptcy court needs to evaluate the debtor's ability to repay debt.  That means the court requires that the non-filing spouse' income needs to be included in the bankruptcy paperwork. This will have no effect on the non-filing spouse's credit record.

2.    Filing jointly saves on costs for the bankruptcy itself. 

3.   Filing jointly avoids creditors trying to reclaim one spouse's debts by going after the assets of the spouse who did not file bankruptcy.  On the other hand, if the non-filing spouse expects a big inheritance or has numerous assets which are protected from creditors, it may not make sense to file jointly. 

As I am so fond of stressing, each situation is different, and so there is no one "right" approach.