Married couples do almost everything together. They plan their lives, raise children, and buy homes and vehicles as a unit. But, they don’t have to file Chapter 13 bankruptcy together.
Can you file Chapter 13 without your spouse? Absolutely. In Illinois and Missouri, you can file Chapter 13 individually even if you are married. However, there are some important considerations to keep in mind if you choose to file Chapter 13 without your spouse.
In this post, we take a deep dive into this topic. Read on to learn more, or contact A Bankruptcy Law Firm, LLC for help.
Chapter 13 Bankruptcy Defined
Before we get too deep into filing Chapter 13 without your spouse, we should take a moment to understand what, exactly, Chapter 13 bankruptcy is. Often called a wage earner’s plan, Chapter 13 bankruptcy allows you to enter into a three- to five-year plan to repay some or all of your debts. At the end of the plan, your remaining debts are discharged and you are free to begin rebuilding your finances.
Unlike Chapter 7 bankruptcy, Chapter 13 can allow you to keep your assets, including your home and vehicles. Instead of liquidating all of your assets, you submit a repayment plan to the bankruptcy court, and, if the court approves it, you make monthly payments to a bankruptcy trustee who distributes money to your creditors.
How Will Chapter 13 Bankruptcy Affect My Spouse?
It is possible to file Chapter 13 without your spouse, but it’s important to understand that your debts and your bankruptcy can still affect them. If you and your spouse share income, the first effect of your Chapter 13 plan they may feel is having to make monthly payments to creditors under the plan.
Fortunately, the automatic stay — which immediately prohibits creditors from pursuing debts from you after you file your Chapter 13 petition — can extend to your spouse even if you file without them. Called a “codebtor stay,” this rule only applies to debts you and your spouse share. Your spouse will still be responsible for paying off individual debts, and their creditors can still pursue payments for them.
Your individual Chapter 13 filing may affect your spouse’s credit score, too. If your spouse stops paying on joint debts because the debts are included in your individual Chapter 13 plan, they can still see their credit score drop as a result of missing bank-scheduled payments on your joint debts.
Including Your Spouse’s Income on the Petition
When you file Chapter 13 bankruptcy, one of the early parts of the process involves filling out Form 22C. This form is used to assess your current disposable income, which will inform the amount you will have to pay each month as part of your repayment plan.
Because your spouse’s income could contribute to the amount of disposable income you ultimately have each month, you must include your spouse’s income on your Chapter 13 petition if you share a household with them. This is true even if you are filing Chapter 13 without your spouse.
The Marital Adjustment Deduction
Including your spouse’s income on your Chapter 13 petition can have the unfortunate effect of inflating your reportable household income, which will lead to higher monthly payments under your repayment plan. Especially if you are filing Chapter 13 individually, you likely do not want your spouse’s income to influence the amount you have to pay each month.
That’s where the marital adjustment deduction comes in. This rule allows you to deduct your spouse’s personal expenses that don’t benefit your household.
How the Marital Adjustment Deduction Can Affect Chapter 13 Bankruptcy
By deducting your spouse’s personal expenses, you reduce your current monthly income as it applies to your Chapter 13 case. This can have two primary effects on your bankruptcy case:
- The time frame. If removing your spouse’s personal expenses from the equation leaves your monthly income below the Missouri or Illinois median (depending on which state you live in), your Chapter 13 repayment plan could be on the shorter end at three years. If your income is above the state median, you might be locked into a five-year repayment plan.
- The monthly payment amount. Reducing your household income has a direct impact on your monthly payments under Chapter 13. As a general rule, the less money you make, the smaller your monthly payments will be. That means the marital adjustment deduction can lower your monthly bankruptcy payments.
Expenses That Qualify for the Marital Adjustment Deduction
Individual bankruptcy courts tend to interpret the marital adjustment deduction differently from one another, so expenses that qualify may differ from jurisdiction to jurisdiction. However, there are some common expenses that usually qualify:
- Mortgage payments on properties the non-filing spouse solely owns
- Car payments and similar expenses tied only to the non-filing spouse
- Child and spousal support the non-filing spouse must pay
- The non-filing spouse’s payments to any creditors for individual debts
- Taxes, insurance payments, and retirement contributions the non-filing spouse makes
As you can see, the expenses that may qualify for the marital adjustment deduction can add up quickly to make a significant dent in your household’s reportable monthly income. To determine exactly which parts of your spouse’s income you may be able to deduct, speak with an experienced Chapter 13 lawyer.
Why File Chapter 13 without Your Spouse?
If you are asking yourself, “Can I file Chapter 13 without my spouse?”, you now know that the answer is most likely yes. But you need to first make sure that filing Chapter 13 without your spouse is the right decision for your unique case. A qualified Chapter 13 lawyer can help you make that decision, but we have laid out some common reasons people who are married sometimes want to file Chapter 13 alone.
Filing Chapter 13 without your spouse may work well for you if you have a lot of personal debt that is not related to your spouse. For example, if you were recently married and brought a lot of loan debt to the marriage, filing Chapter 13 jointly may not be the best option, although this will depend on a wide range of circumstances.
In some cases, even debt you accrued during your marriage may warrant filing Chapter 13 without your spouse. Because Illinois and Missouri are not community property states, unsecured and secured debts you incur as an individual can be individual to you and not considered community debts. You may want to have these personal debts discharged through individual Chapter 13 bankruptcy.
Your Spouse’s Debt
Sometimes, your spouse’s debts may be behind your decision to file Chapter 13 without them. Many factors in your spouse’s financial history may affect this decision, and it’s important to discuss the circumstances of your case with a bankruptcy attorney.
If, for example, your spouse has a relatively recent past bankruptcy, they may be ineligible to file bankruptcy at the moment. In such a case, you may want to file Chapter 13 without your spouse. Another example would be if your spouse has debt that is so high that it would make you ineligible to file Chapter 13 as a couple.
Finally, if your spouse is significantly behind on obligations like child support or alimony, filing Chapter 13 as an individual may make more sense for you. That’s because Chapter 13 bankruptcy will not reduce child support and alimony obligations. That means your repayment plan will have to include those payments in full, which can make your monthly payments too high.
Filing Chapter 13 without Your Spouse? Contact A Bankruptcy Law Firm, LLC
It is possible to file Chapter 13 without your spouse, but you need to consider a wide variety of factors before moving forward with this strategy. An experienced Chapter 13 bankruptcy lawyer can help you understand your unique situation and legal options.
The trusted bankruptcy attorneys at A Bankruptcy Law Firm, LLC, have helped thousands of clients get financial relief through bankruptcy, and they can help you, too. We proudly offer free initial bankruptcy consultations so you can determine whether filing Chapter 13 without your spouse is the right move in your situation. To claim your free consultation, give us a call at (800) 7-BENSON or contact us online today.