Can I File Bankruptcy In Arizona Without My Spouse?
Arizona Community Property Laws & When It Might Be Advantageous To File Bankruptcy Without Your Spouse
When you take your wedding vows, you’re agreeing to take part in almost every part of your spouse’s life. Arizona is also a community property state, which means that all debts and assets acquired during the marriage belong equally to both spouses. So it seems like with everything that spouses are expected to share, filing bankruptcy would be among them. However, contrary to what many people assume, you do NOT have to file bankruptcy with your spouse. Our Arizona bankruptcy team is here to discuss when it may be advantageous to file bankruptcy without your spouse, and how to proceed. If you have any more questions about filing bankruptcy sans spouse, call our firm at 480-833-8000 for your free consultation.
Filing Chapter 7 Bankruptcy Without Your Spouse
Filing Chapter 7 bankruptcy without your spouse is much simpler than filing Chapter 13 bankruptcy without your spouse. That is, in part, because it doesn’t last as long from start to finish. A Chapter 7 bankruptcy will typically be discharged within three to six months. It wipes away unsecured, non-priority debts like credit cards, medical bills, and personal loans. So when might it make sense to file Chapter 7 bankruptcy without your spouse? Let’s say that before you got married, you had $5,000 in a credit card which has ballooned out of control due to interest. That debt is your separate property, and any debts incurred after the wedding are community property debt. If the majority of your debts are separate property and unsecured, an individual Chapter 7 could help you clear that debt without negative repercussions for your spouse.
One of the issues with filing Chapter 7 bankruptcy as an individual when you are married is that your spouse’s income and belongings will still be included in your bankruptcy calculations. To qualify for Chapter 7 bankruptcy, your household income must be less than Arizona’s state median income, or you must pass the Means Test. When you file an individual bankruptcy as a married person, your household income still includes your spouse’s. Your income will be combined and averaged over the previous 6 months before you file. Qualifying for Chapter 7 bankruptcy can be tricky in these types of situations, especially in a dual earner household.
Another issue when you file Chapter 7 bankruptcy with your spouse is that their property might not be protected by bankruptcy exemptions. Many of Arizona’s bankruptcy exemptions, including the $150,000 homestead exemption, don’t increase just because the debtor is married. Other Arizona bankruptcy exemptions only increase moderately when the debtor is married. For example, in Arizona, the motor vehicle exemption is $6,000. This increases to $12,000 in one vehicle or $6,000 each in two vehicles when the debtor(s) is married. If you and your spouse have disproportionate separate property debts, it’s highly likely that your spouse has some possessions that wouldn’t be protected by Arizona’s bankruptcy exemptions.
Filing Chapter 13 Bankruptcy Without Your Spouse
Filing Chapter 13 bankruptcy without your spouse is much more complicated than filing Chapter 7 without your spouse. There are several reasons for this. One is because your payment plan will last either three or five years, depending on how your household income compares to the state median. This is a long time for your financial situation to be frozen by the automatic stay. Another fact of the matter is that three to five years is enough time for a couple to fall out of love and decide to get a divorce, which will be almost impossible to complete during a Chapter 13 bankruptcy.
When you file Chapter 13 bankruptcy, your debts are reorganized into a payment plan that is based on your disposable monthly income. This is another reason that filing Chapter 13 without your spouse can be complicated. Even if you file as an individual, your payment plan will be formulated using your disposable monthly household income. It is unlikely that your spouse wants all of their spare income going towards your Chapter 13 payment plan without being included. You and your spouse may need to work out another way to deal with your debts if Chapter 7 bankruptcy isn’t an option. You can discuss alternatives for free with our Arizona bankruptcy team. Give our Phoenix Bankruptcy Lawyers a call, 480-833-8000, and let us know when is most convenient for your free consultation.
What Happens To Community Property Debt In An Individual Bankruptcy?
Even if the reason you want to file bankruptcy is because of insurmountable separate property unsecured debts, you may still have community property debts that can’t be excluded from your bankruptcy. For example, filing Chapter 7 bankruptcy won’t erase the mortgage on your community property home. The balance for smaller secured community property debts, like cars, can be paid off in a Chapter 13 bankruptcy payment plan. But it can be more complicated if you discharge unsecured community property debts in an individual Chapter 7 bankruptcy.
If you file bankruptcy individually, community property debts will only be discharged in your name. If your spouse declines to join you in the bankruptcy filing, their separate property debts will not be discharged, and community property debts won’t be discharged in their name. Because of the protections provided by the automatic stay, the creditors for community property debts may not pursue you or your spouse during your bankruptcy. However, the automatic stay will end when your case is discharged or dismissed, or even sooner under special circumstances. If you ever divorce in Phoenix, your community property creditors are likely to pursue your spouse for the debts discharged in your bankruptcy. Therefore, declaring bankruptcy in AZ can help you further understand how your individual bankruptcy will impact community debts.
How Can I Protect Myself If My Spouse Files Bankruptcy Without Me?
Even if you don’t join your spouse in their bankruptcy filing, it’s best that you pick up at least some basic bankruptcy knowledge. Filing bankruptcy will likely take up much of your spouse’s time and attention for at least a few months. You simply won’t be able to talk to your spouse about their bankruptcy if you don’t learn some bankruptcy basics. If you want to be extra supportive, you may want to attend consultations and other meetings with your spouse’s bankruptcy attorney, or help them gather the documents necessary to draft their bankruptcy petition. Your spouse may also want your emotional support at their bankruptcy hearing, also known as a 341 Meeting of Creditors.
You should also understand bankruptcy so that you can comprehend what will happen to any debts you may have when your spouse files bankruptcy. You may see no impact at all, or even some slight protections. However, it’s important to still understand the long term effects, i.e., if you get divorced in AZ. You also need to understand the nuances if you are a cosigner on loans that your spouse discharges in their bankruptcy. Therefore, your spouse’s bankruptcy attorney should be able to walk you through all of these issues.
Contact An Experienced Bankruptcy Attorney In Arizona
If you or your spouse is looking for a bankruptcy attorney with experience in specialized issues like filing without a spouse, our Arizona law office has what you need. Plus, our dedicated Phoenix Bankruptcy Lawyers and Tucson bankruptcy staff and attorneys will work tirelessly to file your bankruptcy with as few drawbacks for you as possible. We will keep you apprised each step of the way, so that you and your spouse can feel confident in whatever decision you make regarding your bankruptcy. To get started with our low-cost bankruptcy attorneys, call 480-833-8000 or use our online form to request your free consultation today.
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