Can I File Bankruptcy Without My Spouse in Massachusetts ?

One of the questions I regularly hear from married clients is, “Can I file bankruptcy without my husband or wife having to file?”

The short answer is yes.

Massachusetts law does not require married couples to file bankruptcy together. One spouse can file Chapter 7 or Chapter 13 individually, even if the couple lives together, owns a home together, and shares household expenses.

But whether filing individually is the best approach depends on several things, including whose name is on the debts, how the couple owns their property, and their household income.

In some situations, filing alone makes perfect sense. In others, it may leave the couple with many of the same financial problems they were trying to eliminate.

When Does It Make Sense for Only One Spouse to File?

Consider a married couple where the husband has accumulated $55,000 in credit-card debt. The credit cards are all in his name, and his wife is not a joint account holder or otherwise responsible for the balances.

His wife has relatively little debt and a good credit history.

In that situation, it may make sense for the husband to file Chapter 7 individually. Assuming he qualifies and the debts are dischargeable, he may be able to eliminate the credit-card balances without his wife having to file bankruptcy.

The wife does not automatically become responsible for those debts simply because she is married to him.

Massachusetts generally recognizes that married individuals can own property separately and incur their own financial obligations. There are exceptions, including certain obligations for family necessities, but marriage alone does not make one spouse responsible for every debt incurred by the other. Massachusetts General Court

What Happens If Both Spouses Owe the Debt?

This is where the situation changes.

Suppose the same couple has $55,000 in credit-card debt, but both spouses are legally responsible for the accounts.

If only the husband files Chapter 7 and receives a discharge, his personal responsibility for those dischargeable debts is generally eliminated.

His wife's responsibility is not.

The creditors may still pursue her for the balances she legally owes. A bankruptcy discharge generally protects the person who filed, not other individuals who are also responsible for the debt. Legal Information Institute

This is why I always want to know whether an account is held jointly or whether one spouse is simply an authorized user.

Those are not necessarily the same thing.

Being an authorized user on a credit card generally does not make someone personally responsible for the debt. Being a joint account holder or cosigner usually does.

Before deciding whether one spouse or both spouses should file, it is important to determine exactly who owes what.

Will My Spouse's Income Count Against Me?

This is probably the biggest surprise for married people considering bankruptcy.

Even when only one spouse files Chapter 7, the income of the non-filing spouse generally must be disclosed and may affect the bankruptcy means test.

For example, suppose the husband earns $45,000 per year and his wife earns $95,000.

He might assume that because he earns only $45,000, he will easily qualify for Chapter 7.

Unfortunately, it isn't necessarily that simple.

If the couple lives together, the wife's income generally must be included in the initial household-income calculation.

However, the means test also allows certain adjustments for income belonging to the non-filing spouse that is not regularly used to pay the debtor's household expenses or support the debtor's dependents.

These calculations can make a substantial difference in determining whether someone qualifies for Chapter 7. Department of Justice

The important point is that filing individually does not necessarily allow someone to disregard their spouse's income.

What Happens to a House Owned by Both Spouses?

This is another issue that deserves careful attention, particularly in Massachusetts.

Many married couples own their homes as tenants by the entirety.

Under Massachusetts law, this form of ownership provides certain protections against creditors of only one spouse. Massachusetts General Laws Chapter 209, Section 1 specifically addresses property held as tenants by the entirety and provides protections when the property is the principal residence of the nondebtor spouse. Massachusetts General Court

However, those protections are not unlimited, and bankruptcy adds another layer of considerations.

A bankruptcy trustee may examine the debtor's ownership interest, the amount of equity in the property, the applicable homestead exemption, and whether the debts are owed individually or jointly.

A house owned by both spouses is not automatically beyond the reach of a bankruptcy trustee simply because only one spouse files.

Likewise, filing individually does not automatically mean that the couple will lose the house.

I would want to review the deed, mortgage balance, approximate property value, homestead declaration, and outstanding debts before making a recommendation.

Will Filing Bankruptcy Hurt My Spouse's Credit?

Generally, an individual bankruptcy filing should appear on the credit report of the spouse who filed, not as a bankruptcy filing by the spouse who did not file.

Credit histories are maintained individually, even for married couples.

However, joint accounts can still affect both spouses' credit reports. If payments on a joint obligation become delinquent, that delinquency may affect the non-filing spouse's credit even though that spouse did not file bankruptcy. Consumer Financial Protection Bureau

There is also a practical consideration.

If the couple later applies for a mortgage or another loan together, a lender may evaluate both spouses' credit histories.

Therefore, while an individual bankruptcy does not automatically damage the other spouse's credit score, it can still have financial consequences for the household.

Is It Better to File Together or Separately?

There is no single answer.

If most of the debt belongs to one spouse, filing individually may be the better option.

If both spouses have substantial unsecured debt, a joint filing may be more practical because it can address both spouses' dischargeable obligations in one bankruptcy case.

Sometimes the decision comes down to protecting property. Other times it involves income, prior bankruptcy filings, or the types of debts each spouse owes.

I generally prefer to look at the couple's entire financial situation before deciding who should file.

The goal is not simply to obtain a bankruptcy discharge. It is to make sure that the couple is in a better financial position after the case is completed.

If you are married and considering bankruptcy, you do not necessarily have to file with your spouse.

At Common Law Associates, LLP, we can review your individual and joint debts, household income, and property ownership to help determine whether an individual or joint bankruptcy filing makes the most sense.