Deciding to file for bankruptcy requires serious consideration of all potential outcomes, your goals for resolving debt, impacts on your credit, and many other factors. When you are married and seeking debt relief through bankruptcy, your situation is slightly more complicated. You must still take these matters into account, but you must also think about your spouse’s interests. If you decide to go through bankruptcy together, you will both be impacted by all proceedings in the case.
However, even when your husband or wife is not filing with you, there are implications for your marriage and relationship. Many married couples wonder whether one spouse can file bankruptcy without affecting the other in Detroit, and the answer varies according to the facts of your case. Plus, once you determine whether both spouses will be parties, it is still necessary to choose the right option between Chapter 7 and Chapter 13. A Detroit bankruptcy lawyer can offer specifics on your situation, but a summary of the relevant concepts is helpful.
Bankruptcy Basics for Married Couples in Detroit
Bankruptcy is a legal process by which a person can discharge qualifying debt and be free from obligations to creditors after the case is over. The US bankruptcy laws consider a person to be an individual, but a married couple is also viewed as a single entity. Therefore, either spouse or both may qualify to file for Chapter 7 or Chapter 13 bankruptcy, which is intended for individual debtors.
Chapter 7 and Chapter 13 are very different as far as how the case proceeds, but the result is the same. You eliminate debt through bankruptcy, as long as you are eligible and your debt qualifies for discharge. Married couples should carefully consider the benefits of filing separately or jointly, as the implications are serious and can vary widely. A real-life case can be extremely complicated for Chapter 7 and Chapter 13 because your assets and debts are intermingled. Still, the benefits of bankruptcy and getting out of debt will promote the interests of your entire family.
Two Types of Bankruptcy Cases in Detroit
As an individual, i.e., a solo filer or a married couple filing jointly, you might consider two options for discharging debt through bankruptcy.
- If you qualify, you may eliminate debt through Chapter 7. Eligibility depends upon your earnings, as measured against the state median income. When you make less than this amount, you automatically qualify. Those who earn more must pass the Means Test, which assesses your income and monthly expenses.
Chapter 7 rules aim to pay back your creditors through the liquidation process. The bankruptcy trustee has the power to sell your assets to satisfy debt, but you do have exemptions to protect your property.
- Another solution is Chapter 13, which involves a debt reorganization plan. You pay back creditors through a restructuring of your debt into a lower monthly payment. The only qualification is that you must have a job to pay your debt reorganization plan. The arrangement lasts 3 to 5 years, at which point your case concludes. Your qualifying debt is discharged.
Pros and Cons When Considering Options
With a basic understanding of the laws, you should consult with a Michigan bankruptcy attorney about your options for filing alone or together. At the same time, it is crucial to consider whether Chapter 7 or Chapter 13 will best suit your needs. A few pros and cons include:
- When you file jointly, the cost is shared. Filing fees are $338 for Chapter 7 and $313 for Chapter 13 bankruptcy, and they do not double for married couples.
- In many cases, you will be able to double the value of your exemptions. However, in Michigan, the homestead exemption to protect equity in your home cannot be doubled.
- If you opt for Chapter 7, the downside is that both of your incomes will be included for purposes of determining eligibility. You may be able to take advantage of the marital adjustment deduction to qualify.
- When just one spouse files bankruptcy, that person’s credit score will drop and the case remains on their credit report. The other spouse’s credit is not affected.
Debt You Can Discharge Through Bankruptcy
When a married couple is considering all bankruptcy options, you must consider the debts you owe separately and together. One person may have incurred significant debt before getting married, while the other did not. Another common scenario is where both spouses got into problems after getting married.
A joint filing means you can wipe out all qualifying debt in one case, which would include the amounts you owe creditors as an individual and as a married couple. Alternatively, if you file two cases separately, you may eliminate debt while also getting twice the exemptions. You might be able to double your homestead exemption, which is not available for married spouses who file Chapter 7 jointly.
Regardless of the type of bankruptcy and whether you both file, it is possible to eliminate debt for credit cards, personal loans, and medical debt. There are some debts you cannot discharge, including:
- Court-ordered alimony or child support;
- Certain taxes;
- Amounts you owe for a personal injury case after causing a DUI accident; and,
- Many other non-dischargeable debts.
Steps in the Bankruptcy Process
The interests of two individuals and one marital entity are at stake with bankruptcy, so legal assistance is critical when you are filing Chapter 7 or Chapter 13 in Detroit. A Michigan bankruptcy attorney will be your best asset for getting through the complicated process, so you can count on help with:
- Organizing financial documents for your assets, debts, income, and expenses;
- Preparing and filing the joint or individual bankruptcy petition, along with all necessary schedules;
- Applying exemptions for Chapter 7 to avoid or minimize liquidation of assets;
- Developing your debt reorganization plan for Chapter 13;
- Representing you at the meeting of creditors, which one or both spouses are required to attend;
- Finalizing all necessary tasks to complete your case; and,
- Obtaining the final order from the bankruptcy court, discharging qualifying debt.
Contact a Detroit Bankruptcy Attorney to Discuss Details
If you are considering options to get out of debt and need information on whether one spouse can file bankruptcy without affecting the other in Detroit, legal advice is critical. Decision-making requires you to consider the rights, needs, and interests of both members of a married couple. Our team at Kostopoulos Bankruptcy Law can explain how Chapter 7 and Chapter 13 work, including additional details on filing jointly and individually. Please contact our office today to set up a consultation with a Michigan bankruptcy lawyer.