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Filing a joint vs. individual chapter 7 bankruptcy

If you are married and considering Chapter 7 bankruptcy as a debt crisis solution, then you and your spouse will have to discuss whether you want to file a joint petition, file your own separate cases, or have one of you file alone. There is no right answer that applies to all couples equally—it all depends on how much debt you each have, your respective incomes, and whether either of you has filed for bankruptcy before.

About Chapter 7 bankruptcy

Also known as a “liquidation bankruptcy,” Chapter 7 quickly and efficiently eliminates most types of unsecured debts, such as:

  • Credit card balances
  • Utility bills
  • Cell phone bills
  • Medical debt
  • Personal loans

There are several exemptions that allow you to keep some, if not all, of your personal property. New York allows you to choose between state and federal exemptions when it comes to deciding which assets you want to protect. Anything that is not exempt, however, may be seized by your trustee and sold to satisfy your creditors.

Separate or together?

So should you file together or separately? As stated above, that largely depends on your individual circumstances and the laws of New York State.

  • Debt levels: New York is an equitable distribution state, which means that all debts acquired during the marriage are not assumed to be the equal responsibility of both spouses. You need to review how much debt each of you owes before deciding on a joint bankruptcy. For example, if you owe $25,000 in total and your husband or wife owes only $5,000, your spouse may not have to file, especially if they are current on their accounts.
  • Income: To qualify for a Chapter 7 filing, you, your spouse, or both of you as a couple will have to pass the Means Test, which measures your ability to repay your debts. It looks at the household income of the filers and, if you appear to have too much disposable income, you may have to file for Chapter 13 bankruptcy instead. When you file as a couple, you may fail the Means Test because your combined income exceeds the state threshold for New York.
  • Previous Filings: If one (or both of you) received a Chapter 7 discharge within the last eight years, you will not be able to file another one until the eight-year period has passed.

Filing for bankruptcy in New York is a major decision. Whether you and your spouse should file jointly or together is a matter to be discussed with a qualified New York bankruptcy attorney. If you both need debt relief, a joint Chapter 7 bankruptcy is less expensive than two individual ones, as only one petition and set of documents needs to be filed. Your attorney will advise on whether or not you qualify for Chapter 7 and point you in the right direction for your situation. Jayson Lutzky, a Bronx, New York lawyer with more than 34 years of experience serving the legal community, offers free in-office initial consultations for prospective clients. Call 718-329-9500 to set up an appointment or visit www.MyNewYorkCityLawyer.com. Saturday appointments are available.

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