When entering a marriage, an individual may assume their personal property and assets brought into the relationship will continue to be their own but this may not always be the case. While debtors have the option to file bankruptcy jointly with their spouse, they may also seek relief as an individual. So what happens when a spouse decides to file bankruptcy and how does the process affect personal assets?
The bankruptcy process is likely influenced by the state you reside in. This can sometimes make bankruptcy complex; bankruptcy is an action on the federal level but each state has certain regulations of their own that may affect how your case proceeds. Certain states, such as Texas, are community property states meaning you and your spouse share assets acquired during marriage. Keep in mind, assets obtained by each spouse before marriage is not considered community property.
So when it comes to bankruptcy, it’s possible for one spouse to use their personal property to satisfy outstanding debt. In some cases, community property could be used to satisfy debt, depending on the circumstances surrounding the situation. Personal property belonging to the spouse who has not filed a bankruptcy petition is often not used to satisfy debt of the spouse who has filed. In the case of joint debt, meaning both spouses are responsible for what is owed, community property could be used to satisfy debt by creditors.
In many cases, one spouse can file a petition but if joint debt is included, creditors may pursue the other spouse. If outstanding debt is significant between each spouse, both may look to seek joint bankruptcy protection. If you are considering filing a solo petition, discuss your situation with a bankruptcy attorney to thoroughly review your options and determine the best solution.