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If you are married at the time you file for voluntary bankruptcy, whether Chapter 7 or 13, you will have to make an election to file either joint or separate bankruptcy. If you decide initially to file separately, then later decide you would like to add your spouse as a joint filer, this can be done by adding your spouse into your bankruptcy action. So, while you must make an election up front, that election does not permanently lock you in.
Filing bankruptcy separately will fully resolve all of your separate debts. To understand whether a debt is joint or separate, you must understand the marital property laws of your state. Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states where the rules are a little different. In a community property state, each spouse is fully liable for any debts taken out by either spouse during the marriage. In all other states, called common law property states, only the spouse who is named on each debt is liable for the debt.
If you file bankruptcy separately in a community property state, your bankruptcy will discharge all liability on community debts. This means your nonfiling spouse will be relieved of legal liability on the debt, even though she has not filed bankruptcy. As for common law debts, if you
file separately, then only your separate debts will be discharged. Your nonfiling spouse will still be responsible for all debts jointly entered by you and your spouse.
Just like with debts, the rules on property in bankruptcy depend on whether you live in a community property or common law state. When you file for bankruptcy, you have to list all of your property as part of your bankruptcy estate. Any property that you own as community property must be listed with its full value. This is true even though your spouse technically owns half the property. This could cause your spouse to lose property in the liquidation process, even though your spouse has not filed bankruptcy. As for common law states, you only have to list property that you own. If you own property jointly with your spouse, you must list it, but if your spouse is the sole and separate owner, you do not need to include that property as part of your bankruptcy estate.
One of the advantages of filing jointly is that most states allow joint filers to claim double the exemptions. Exemptions allow you to keep property out of the liquidation process. Any nonexempt property is sold by the bankruptcy trustee as part of the liquidation process. Particularly in community property states, filing jointly could protect a lot more of your marital property than filing separately.