Joint Bankruptcy Petitions

Austin, Texas, Board Certified Bankruptcy Lawyer

Joint Bankruptcy Petition

A joint petition is the filing of two bankruptcy cases with a single bankruptcy petition that are jointly administered. A joint bankruptcy petition may only be filed by an individual and the individual's spouse. Only people who are married on the date they file may file a joint bankruptcy petition. Unmarried partners must each file a separate case. Texas recognizes common law marriages so, even if you have not been through a formal marriage ceremony, you may file a joint petition if you live together as husband and wife and intend to be married. If you file a joint petition and change your mind later and decide that you do not want to not be married you will have to obtain a legal divorce.

Considerations When Only One Spouse Files

Texas is a community property state. Many issues arise when one spouse files for bankruptcy in a community property state. In Texas (and several other states including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington, and Wisconsin), state law classifies property owned by married persons as either "separate" (belonging to only one spouse) or "community" (jointly owned by both spouses).

There are five different types of property in Texas. Separate property belonging to the husband; separate property belonging to the wife; community property subject to joint management and control; community property subject to separate management and control of the husband; and community property subject to separate management and control of the wife. Depending upon whether a claim arises out of contract, tort, or the statutory duty of support, the property may or may not be property of the bankruptcy estate. Texas is not a community debt state. The rules governing spousal liability on a debt are complicated but must be taken into consideration in determining whether a joint petition should be filed. There are some situations where it may be advisable for one spouse but not the other to file bankruptcy because the Bankruptcy Code grants a community discharge to the non-filing spouse in community property states. This may be especially helpful in cases where the non-filing spouse has claims that would not be discharged in the bankruptcy case. Your circumstances should be carefully examined by an experienced Board Certified Bankruptcy Attorney before making this type of decision.

Texas state law defines a spouse’s separate property as (1) property owned or claimed by the spouse before marriage; (2) property acquired by the spouse during marriage by gift or inheritance; and (3) damage recoveries for personal injuries sustained during marriage, except any recovery for loss of earning capacity during marriage. All other property acquired by either spouse during marriage is community property. The way title to the property is held is irrelevant. Property acquired during marriage, but titled in only one spouse’s name, is still classified as community property. For example, a house or car acquired during marriage is community property even if the title is placed in only one spouse’s name.

The bankruptcy estate usually includes all community property, even if only one spouse files for bankruptcy. If only one spouse files for bankruptcy, the bankruptcy estate usually includes all community property, plus all of the filing spouse’s separate property. The filing spouse must disclose all community property, and it is subject to seizure and sale by the bankruptcy trustee unless it is exempt under applicable law.

For example, assume that during marriage, the husband purchases a car that is titled only in the husband’s name. The wife files for bankruptcy. The husband does not join in the bankruptcy filing. The car is part of the bankruptcy estate and must be disclosed on the bankruptcy schedules.

Divorce Decree Does Not Protect Spouse from Creditors If Ex-Spouse Files For Bankruptcy

Divorce Courts do not have jurisdiction over creditors who are not a party to the divorce proceeding. Therefore, a Divorce Decree that orders one spouse to pay a debt for which the other spouse is jointly liable does not release the other spouse from liability on the debt. If your ex-spouse does not pay a debt he or she was ordered to pay in the Divorce Decree then the creditor can require you to pay the entire payment of the debt, even if your ex-spouse declares bankruptcy. The liability to the non-filing ex-spouse may be non-dischargeable in the other ex-spouse’s bankruptcy proceeding. You should consult with a Board Certified Bankruptcy Attorney if this situation arises.

Co-Signers and Guarantors Remain Liable

If you co-sign or guarantee a loan then you are liable to pay the entire debt if the principal borrower declares Chapter 7 Bankruptcy. If the principal declares Chapter 13 Bankruptcy then you may be entitled to protection from the bankruptcy court even though are not a party to the bankruptcy, but only if the principal repays all of the debt.

Free Consultation: Contact Board Certified bankruptcy attorney Fred E. Walker in Austin, Texas, for a debt relief consultation. There is no cost or obligation.