||Ask Dr. Don
Married filing separately --
Dear Dr. Don,
Can one spouse file bankruptcy on his or her debt alone, or is the
entire household considered one entity?
One spouse can file for bankruptcy without the other joining the
petition. Whether it makes sense for one spouse to file depends
on who owns what and who owes what.
Nine states -- Arizona, California, Idaho, Louisiana,
Nevada, New Mexico, Texas, Washington and Wisconsin -- are community
property states. In those states community property includes real
estate, tangible assets, and the earnings of both spouses acquired
during the marriage. Assets acquired by gift or inheritance or assets
owned before marriage are not community property.
In these states all community property is part of
the bankruptcy estate. Property held by the filing spouse is used
first, then the nonexempt community property is used to pay creditors.
The other states are common law, or equitable distribution,
property rule states where the filing spouse's bankruptcy estate
includes property held separately and half of the jointly held marital
property. The nonfiling spouse doesn't have to worry about the effects
of the filing spouse on separately held property -- just the jointly
If the bankruptcy court believes that assets were
transferred to the non-filing spouse simply to remove them from
the bankruptcy estate, it can declare that transfer fraudulent and
include the assets in the bankruptcy estate.
As stated earlier, the decision to file a joint petition
or a single petition for bankruptcy depends on who owns what and
who owes what.
There are also different types of bankruptcy filing.
A Chapter 7 filing is a liquidating bankruptcy and will discharge
the debt while a Chapter 13 filing sets up a repayment schedule
for the listed debts. Consult with a bankruptcy attorney to ensure
that you're making the right decisions.
-- Posted: May 3, 2002