Going through a divorce? what do you do now?

Filing for Bankruptcy When You Have Shared Assets with Your Spouse

Married couples typically do a lot together. However, this idea does not mean that they do everything together, especially when it comes to finances. For this reason, when one spouse files for bankruptcy, no requirement forces their spouse to also make this filing. Consequently, when one spouse files for bankruptcy and the other one does not, it is normal to have questions about what will happen to their shared assets.

Ownership Is Only a Partial Factor

Consider a scenario where a couple jointly owns an area of land. One person decides to file bankruptcy, while their ex does not at all worry about the land being included in the bankruptcy since they are a joint owner and they're not the one filing for bankruptcy. This sort of mindset could turn out to be a problem. Couples need to understand that the mere fact that a property is jointly owned does not in any way automatically exclude it from the bankruptcy proceeding. You need to speak with an attorney to have someone take a closer look at your situation.

Community Property States Have Guidelines

For any couple that resides in a community property state, it does not matter which spouse is filing for bankruptcy. As long as the person who is filing for this protection is listed as a legal owner on the property, the fact that their spouse is an equal owner does not matter. In community property states, couples, all their assets, and debts can be considered as one.

Consequently, any jointly owned assets can be included within the bankruptcy proceeding, regardless of whether or not the other spouse aggress. It is best to speak with an attorney if you live in a state with this law. 

There Is No 50-50—Only a 100% Guideline

Whenever an individual decides to include a property in their debt restructuring plan, it is all or nothing. Consider the previous land example, for instance. If a spouse decides to include the sale of the land in the filing, upon the sale of the land to repay the debt, the creditor will not return 50% of the proceeds to the other spouse. If the debt is included in the bankruptcy plan, 100% of the earnings gained from the sale of the property will be applied to the debt. All parties need to be certain they want to include jointly owned property in the proceeding when they are not required to do so by law. 

Remember that every situation is different; don't assume how your shared assets will be treated during a bankruptcy proceeding. Instead, contact a bankruptcy law attorney.