Dear Bankruptcy Adviser,
My husband and I need to file for bankruptcy. But we are afraid of losing our home by filing for Chapter 7 and can't afford to file for Chapter 13 because one of us owes too many hospital bills! If all the secured debt is in both of our names, can only one of us file for Chapter 13?
It is possible for only one household member to file for bankruptcy, keeping the other spouse out. However, you need to explore both options prior to making the decision to file for Chapter 13.
I can give very general advice because each state is different. While you can file for bankruptcy without the assistance of an attorney, you can consult with someone that will properly assess your options.
You state that you are afraid of losing your home. I understand this is a real fear and one that cannot be taken lightly. Each state allows you to protect a certain amount of equity when you file for bankruptcy.
Many people who file for bankruptcy today do not have any equity in their homes. In this type of case, the house is safe so long as the mortgage payments remain current. The lender cannot take the property when payments are current. This is also true when you have exempt (protected) equity in the house. As I said above, each state is different and it is possible to protect all the equity in your home while still qualifying for Chapter 7 bankruptcy.
You also state that you would like to file a Chapter 13 bankruptcy with one spouse rather than both. Chapter 13 is a repayment of none, some or all of your debt over a three- to five-year period. Most or all of your creditors are lumped together into one pool. You then make payments each month to the person assigned to your case, called a trustee. The trustee distributes your payment to the creditors.
One spouse can file even if you both are listed on the bills. In the ideal case, you are going to repay all your debts over the next three to five years. However, in many cases, you do not pay back all the debt. This would complicate your ability to file only one spouse while leaving the other spouse out of bankruptcy. The total amount of debt and your ability to pay back some or all of it will determine whether it is possible to file one spouse without the other.
I wish I could easily say that you do not have to speak to a competent bankruptcy attorney, but when you are not paying back all your debt in the Chapter 13, the other spouse's situation needs to be addressed. Creditors might come after the spouse that's not filing. Your attorney should know how to protect the nonfiling spouse while you are inside bankruptcy.
Make sure to diligently review all of your options. Many clients and readers have told me that based on their research, they qualify for one type of bankruptcy only. However, many times the client is incorrect. You might be able to protect your home and eliminate your debt without paying back any creditors.
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