Married and in debt? Bankruptcy options to consider
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If you’re deep in debt and married, North Carolina bankruptcy can be filed jointly or individually. Before you default to filing as a couple, you should consider which option most benefits you. It may be best to file as a couple, for only one of you to file, or for you to file separately under different chapters. Here’s what to consider.
#1 What Assets Do You Own, Whose Name Are They in and How Much Equity Do You Have?
If there is negative equity in your home, you may want to consider unloading it through bankruptcy no matter whose name it's in. If the home is in both your names and you’re behind on payments, filing bankruptcy together may make the most sense.
If you have little equity and have a second mortgage or HELOC, bankruptcy can wipe those out and should be factored into your filing decision. If you’re behind on payments but want to keep your home, Chapter 13 may be preferable over Chapter 7.
#2 Whose Name Is the Debt in, and Is Any of It Jointly Held or Co-Signed?
If your debts are co-owned, joint bankruptcy may make more sense. In some cases, though, filing individual bankruptcies spaced apart may be more strategic. If there is co-signed debt, creditors will try and collect from the other spouse anyway, so a joint bankruptcy can still be the best approach to take to protect you both.
If all the debts are in one name, you may get the best results by having that person file individually. There’s no need to impact the credit score of both spouses if the debt belongs only to one of them.
#3 How Much Do Each of You Earn and Is Either of You Unemployed?
If you and your spouse are living in the same household and decide to file for Chapter 7, which offers greater debt relief than Chapter 13, both your incomes will be used for the Means Test and to calculate disposable income when setting your repayment plan.
The last six months of income are factored, so if you’re considering Chapter 7 and one of you was unemployed, it might be a good idea to file bankruptcy while there’s considerably less income on average. Timing in bankruptcy is critical.
#4 Have Either of You Filed a Prior Bankruptcy?
If either of you filed a previous bankruptcy, it can affect your current options. A Chapter 13 not followed to discharge will be less of a factor than a prior Chapter 7 filed by one of you – unless the Chapter 7 was dismissed before discharge.
You must list prior bankruptcy filings on your petition, and these should also be revealed to your attorney at your initial consultation so you can get the best advice.
#5 Are You Planning to Separate or Divorce?
If your marriage is in trouble, sorting out your finances prior to divorcing is usually advisable to get a clean financial slate. It can also be easier to end a relationship on amicable terms if there are no lingering financial issues to cause conflict.
If you are planning to separate, filing bankruptcy while separated, but before you divorce, may offer the most flexible options. This strategic decision may allow you to get the most sweeping relief prior to making your split official.
If you’re a North Carolina couple struggling with your finances, and you want to find out how bankruptcy can benefit you, contact the Law Offices of John T. Orcutt.
Call +1-919-646-2654 now for a free North Carolina bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.