Phoenix Bankruptcy Law News

Do Married Couples Have to File Joint Bankruptcy?

If a spouse needs to file bankruptcy in Arizona, does that mean that a married couple in Arizona has to file jointly?

Joint bankruptcy is an option available for married couples, allowing them to file with one petition. When spouses file jointly, their property and debts are combined into the same bankruptcy filing. This may be ideal for married couples who have already combined their assets. However, if one spouse wants to own the responsibility of filing bankruptcy, without obligating his or her spouse, joint bankruptcy may not be appropriate.

Bankruptcy law does not require joint filing; spouses are free to file separately if they so choose.

Community Property and Bankruptcy

The option to file for joint bankruptcy doesn't necessarily mean that the other spouse's assets are safe from debt collection - their property may be just as susceptible. This turns on a number of factors, but it starts with the fact that Arizona is a community property state.

Community property states characterize a spouse's assets into two categories: separate property or community property. Arizona recognizes most property acquired during a couple's marriage to be a part of the community property. Separate property can include things like gifts given to just one spouse or funds bequeathed to them specifically from a relative's will. All property acquired before the marriage is deemed each respective spouse's separate property, but it can become community property if mixed in with community assets during a marriage.

For those who choose to file jointly, the community property, which is yours and your spouse's, may still be up for grabs in the bankruptcy process.

Calculating Income/Assets

If you live in a community property state, community property may be eligible to satisfy debts even if only one spouse files for bankruptcy. The Means Test under a Chapter 7 bankruptcy filing, for example, looks at both spouse's incomes in calculating the household income. Presumptions about property, even when held in just one spouse's name, are different from state to state and can change the overall assets considered in a couple's bankruptcy.

The bottom line here is that as a spouse, you are free to file individually, but because Arizona is a community property state, some of your spouse's assets may still be vulnerable to the bankruptcy process. The best way to proceed, if you have any questions or concerns, is to consult with an experienced local attorney about the matter who can help you determine the best course of action.

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