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Filing Bankruptcy as a Married Couple – Is is the Best Way to Go?

As a married couple you’ve got the option of going it together when it comes to bankruptcy. Joint bankruptcy happens to be one such thing that you can file together as a married couple. However, there’s a flip side involved in this story as well and that includes specific circumstances wherein it becomes harder for you to qualify for Chapter 7 bankruptcy or for that matter protect all of your property.

What happens when you file bankruptcy as a married couple?

Filing bankruptcy as a married couple comes with its own set of benefits. Read on to find out more.

1. It’s far more convenient: Filing bankruptcy as a married couple helps a lot for it can make the entire process far more convenient. Joint bankruptcy makes things so much more convenient simply because of the fact that you get to wipe away all your debts together and that too through a single bankruptcy. Moreover, for a joint bankruptcy as a married couple you don’t even need to attend separate hearings.

2. You save money: When it comes to filing joint bankruptcy, then it also saves you money for the court filing fees happen to be the same both in case of individual as well as joint bankruptcy. Then again, it’s a known fact that the bankruptcy attorneys will charge a lot less for a joint bankruptcy as compared to 2 individual bankruptcies. This would only be applicable if you choose to hire a bankruptcy attorney. It’s obvious since there’s less work involved for the petition as compared to 2 bankruptcy filings.

Filing bankruptcy to pay off debt as a married couple has certain difficulties involved as well.

1. Qualifying for Chapter 7 becomes difficult: As a married couple filing bankruptcy, you need to first pass a means test if you’re looking to qualify for Chapter 7. This bankruptcy test essentially involves comparing your income against the median income for a similar kind of household in your state itself. Now if the results show that your income falls below median, then you’ll qualify automatically. On the other hand, if it happens to be above median, then you’re required to disclose all your expenses on this means test so that you manage to qualify.

2. It gets harder to protect all your property: Going by Chapter 7 exemptions, you’re definitely allowed to keep some of your property. Now what you should know is that being married and filing a joint bankruptcy entails certain states allowing you to double up the amount of your exemptions. This would be taking into account the fact that 2 people generally own more property as compared to a single person. However, there are some states which don’t allow married couples to double up their exemptions in spite of filing for a joint bankruptcy. Actually it’s been mostly seen that it’s only about slightly higher. This again goes on to indicate that even in case you go ahead and file an individual bankruptcy leaving aside your spouse, even then you might not be able to exempt all property owned between you and your spouse.

Well, though the above discussion holds true and you might base your decision accordingly, yet it’s also a fact that being married doesn’t make it mandatory to file bankruptcy together. In case it’s only one of you who’s in debt, then there’s simply no need for the other to file bankruptcy. However yes, fact remains that the non-filing spouse is still required to disclose his or her income during the bankruptcy proceedings. If you both are in debt, then joint bankruptcy might just prove a better option ultimately.

Foreclosure And Your Credit Score

foreclosure defense and bankruptcy attorneysIf your home goes into foreclosure it will have a negative impact on your credit score. However, the nature and extent of the negative impact may be different than what you believe it to be. When a financial institution brings a foreclosure lawsuit related to a mortgage default, the institution will normally report to the credit agency there is a foreclosure or a home has been foreclosed upon. This information on your credit score will not necessarily impact on the outstanding balance it shows you owe on the mortgage. The credit report will most likely continue to show the entire outstanding balance of your mortgage being due and owing on your credit report. This negative credit material can stay on your credit report for seven years.

Sales Of Homes In Foreclosure

At the end of the foreclosure process, if the bank is a successful, your home will be sold. In the event the sale of your home at the foreclosure sale does not pay off the entire outstanding debt due in owing on your mortgage, the remaining balance may be shown on your credit score as a “deficiency “. The financial institution may be able to bring a proceeding to collect on this deficiency amount. If they do not take action to collect this deficiency they can report it to the Internal Revenue Service as a forgiven debt. This will cause you to receive a 1099 showing the deficiency as income to you in that tax year. This will cause you to pay income taxes on this deficiency debt!

Foreclosures On Second Mortgages

When the financial institution forecloses on a first mortgage, the second mortgage may continue to be maintained on your credit report by the credit reporting agency. The second mortgage will not show it was foreclosed on because it is a separate and distinct financial obligation.

Bankruptcy And Foreclosure

It may be necessary to file a Chapter 7 bankruptcy to eliminate deficiency judgments related to first mortgages and the personal obligations on a second mortgage. To better understand the inferences and long-term impact on your credit score it is strongly suggested to contact either a bankruptcy lawyer or foreclosure lawyer.foreclosure and bankruptcy  assistance

Bankruptcy Fallacies – Part I

new york bankruptcy lawyerOne of the most widely held beliefs concerning individuals who file bankruptcy is they will never be able to obtain credit again. This is simply untrue. Although a bankruptcy filing will be maintained on your credit report for 10 years, most individuals who file bankruptcy can rehabilitate their credit within 18 months. A debtor who files for chapter 7 bankruptcy can eliminate all of his or her debt.

If the debtor obtains a secured credit card after filing bankruptcy and makes credit card payments on a regular basis he or she can reestablish credit. When this debtor files a new credit application, the financial institution will see all prior debt was discharged in bankruptcy and the individual, for the past 18 months, has been paying his or her debt on time. This makes this individual less of a credit risk to the financial institutions.

In my legal practice, I have represented individuals who have filed for bankruptcy three times during the course of my career. This means after the first and second bankruptcy they are able to establish credit all over again, run their credit up, go bankrupt again and then do a third time.

Individuals Who File Bankruptcy Can’t Have Assets

It is a mistaken belief that before someone can file bankruptcy they have to have virtually no assets. This is untrue. New York State has an exemption statute of $150,000 for equity in a home (this statute depends on which county the home is located in). There are also exemptions under New York State law for $5,000 in cash and a car with up to $4,000 in equity in it. New Yorkers can also choose to utilize Federal exemptions. Under Federal exemptions, there is a $21,625 exemption for the value of a home and $10,825 for cash held by the individual filing for in filing for bankruptcy

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