One spouse can file for bankruptcy without the other joining in the process, or even consenting to it. There are many instances where a couple would only want only one spouse to file. If one spouse has all the debt, but all of the assets are in the name of the other spouse, only the debt-ridden spouse would file. This would result in the couple keeping all of the assets while getting rid of the unmanageable debt—what is known today as a “win-win” situation.
In the situation where only one spouse files for bankruptcy the income of the non-filing spouse must be included in the budget and the Means Test portions of the filed bankruptcy petition. This is true in both a Chapter 7 filing and a Chapter 13 filing. Sometimes this “additional income” can affect the debtor’s eligibility for Chapter 7 relief, but frequently the income attributable to the non-filing spouse can be effectively negated on the Means Test by use of the Marital Adjustment allowed on line 17 of the Means Test.
If a couple has joint debt but only one spouse files for bankruptcy, the non-filing spouse remains fully liable for all of the joint debt. We frequently hear clients tell us that “my spouse is the primary debtor on the loan, I only co-signed”. This distinction might mean something to you, but in the eyes of the creditor and the law, you are each fully liable. If only one spouse files for bankruptcy in a situation where joint debt is involved, the “family unit” (ie., debtor and non-filing spouse) is still on the hook for all of the joint debt.
The assets individually owned by the non-filing spouse do not have to be listed in the debtor’s petition and, absent any fraudulent transfers involving said assets, are not administered by the Chapter 7 Trustee. However, if assets are jointly owned and only one spouse files, the filing spouse’s interest in the joint asset (usually one-half) is part of the bankruptcy estate and can be administered (ie., liquidated) by the Chapter 7 Trustee in certain circumstances.