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Chicago Bankruptcy Question: Does my spouse have to file for Chapter 13 with me?

Chicago Bankruptcy Question of the Day: Does my spouse have to file for Chapter 13 bankruptcy with me?  When you file for Chapter 13 bankruptcy in the Chicago area, or any form of bankruptcy in any region of the U.S., you generally have the option of filing individually or jointly with your spouse.  The rare exceptions to this rule are when you are forced into an involuntary bankruptcy by your creditors or when one spouse has been barred from filing by the bankruptcy court in a prior case. The more pertinent question is "Does it make sense for you and your spouse to file a joint Chapter 13 case, or for you to file alone?".  The answer to this question depends on a lot of factors specific to your case, but the general concepts to consider are the following. 

First and foremost, when filing for Chapter 13 bankruptcy protection, all household income must be disclosed and taken into consideration when formulating the household budget and repayment plan, as are all household expenses.  You cannot file an individual bankruptcy and pretend that your spouse's income does not exist, nor do you want to leave their car payment off of your budget. 

Second, all debts that you are liable for must be addressed within your Chapter 13 plan, including those debts held jointly with your spouse.  If you are proposing to pay less than dollar for dollar on joint debts, then your spouse will still be liable for them after the bankruptcy is discharged if they do not file with you.  Similarly, if your spouse has significant debts that could be discharged held in their name alone, and since your payment will be based on your household budget, there is little reason to file an individual Chapter 13.

Finally, if you are attempting to significantly alter a jointly held secured debt, such as reduce a car payment, strip-off a junior mortgage or cram-down the mortgage on an investment property, it will usually be necessary to file jointly in order to make that effective.  Otherwise the non-filing spouse would still be liable for the debt once the Chapter 13 is discharged and the creditor's lien would remain on the property.

There are times where it makes sense for only one spouse to file for Chapter 13 bankruptcy protection in the Chicago area.  A common situation is where the vast majority of debt is in only one spouse's name, often occurring when one spouse brings debt into a marriage.  In these cases, an individual Chapter 13 can alleviate the debt from the filing spouse, while the non-filing spouse can maintain their credit score.

If you are married and are considering filing for Chapter 13, you need the representation of an experienced Chicago bankruptcy attorney.  You should both attend the consultation so that all of the facts are on the table and you can be properly advised by a bankruptcy lawyer.  The last thing that a good bankruptcy lawyer wants is to file an individual case, only to have the non-filing spouse decide to file later, incurring unnecessary legal fees and costs.  The experienced bankruptcy lawyers and Ledford & Wu are always happy to offer a free consultation to review all of the potential plusses and minuses of filing for Chapter 13 bankruptcy protection individually or jointly and to advise you appropriately.

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