What Happens If Only One Spouse Files Chapter 13?

Income Considerations

Your eligibility for a Chapter 13 bankruptcy depends on how much disposable income you have each month to devote to paying off your debts. The trustee begins with your total monthly income, and then subtracts the amount of money you need to spend each month for necessary living expenses. The trustee then divides the balance each month among your creditors. Your spouse's income is a factor in this process because her money is also coming into your household. If you're married and you file for a Chapter 13 plan on your own, your spouse's income affects how much of your own money must go toward necessary expenses. If her income is paying a portion of those bills, your contribution to them would be less. This increases the amount of money you have left over to pay your creditors, so the trustee will take this into consideration.

A Chapter 13 bankruptcy not only protects the debtor who filed, but her co-signers and co-debtors as well. If you and your spouse have joint consumer debt, such as credit cards and other unsecured loans, the automatic stay that goes into effect when you file for Chapter 13 protection covers him as well because you're repaying the debt, or at least a portion of it. In a Chapter 7 bankruptcy, your creditors could still go after your spouse for debt you assumed together.

Many Chapter 13 debtors file this kind of bankruptcy to avoid foreclosure on their homes. The repayment plan covers past due mortgage payments, and your current mortgage payments are part of your necessary expenses. The mortgage company cannot proceed with foreclosure efforts because you're paying both. If you and your spouse hold the mortgage and the deed to the property jointly, then your bankruptcy plan preserves her portion of the investment as well.

A Chapter 13 bankruptcy, as opposed to a Chapter 7 bankruptcy, particularly protects spouses in community property states. In these states, spouses are both owners of their marital property; they don't own half of each asset. In a common law or equitable distribution state, one spouse's Chapter 7 bankruptcy affects only one half of the marital property. In a community property state, however, because each spouse owns the totality of the assets, the bankruptcy trustee can potentially sell those assets to pay off your debts. There are nine community property states: Arizona, California, Louisiana, Idaho, New Mexico, Nevada, Washington, Texas and Wisconsin. In these jurisdictions, your spouse stands to lose a lot more if you file for a Chapter 7 rather than a Chapter 13. If you're unsure which kind of bankruptcy is right for you and only one of you is filing, talk with an attorney to explore all the ramifications if you live in one of these areas.