Bankruptcy proves to be an extremely complicated and trying process, but it isn’t necessarily one that both spouses have to share. Depending on the debt that you owe, it may not be in your best interest to file jointly. Nevada is a co-own (community property) state during marriage, meaning that any debts accrued are the responsibility of both spouses. While this may not seem fair, there are many other factors to consider before you decide whether and how to file for bankruptcy and the pros and cons for each.
Nevada allows both spouses to file a joint petition for bankruptcy since most often debt is accrued during a marriage. Personal and marital debt will fall under the umbrella of a joint filing, making it a two-for-one situation. In the end, both spouses could have both their individual and married debt discharged. In Nevada, exemptions may be doubled for spouses filing jointly, which is a huge asset for relieving debt. The Homestead Exemption, however, will not allow doubling. If you can use the exemptions to your benefit, filing jointly is usually the best option.
Filing for debt individually may still hang your spouse out to dry, as s/he will be responsible both for his or her individual debt as well as those accrued during the marriage. His or her income will be considered in the overall calculations and property will definitely be considered since Nevada is a community property state. However, if one spouse has a large amount of non-exempt debt, it may make more sense for him or her to file individually, especially if the other spouse has a better financial situation. The catch here is that, because Nevada is a co-own (community property) state for marriage, the non-filing spouse can still find their assets seized and sold by the trustee to pay off their spouse’s accrued debt. Definitely consider discussing your options with a seasoned bankruptcy attorney to be versed on your options.
Because of Nevada’s law, all marital assets are seen as equally owned by both spouses as joint assets. Even if one spouse ran up the debt, all marital assets can be liquidated to pay off the debt. Even though the debt will be wiped out for the filing spouse, the non-filing spouse can still be responsible for community debt after the case is settled. On the other hand, since the non-filing spouse won’t have his or her credit dinged, s/he would still be able to obtain loans and other means.
STAGGERING THE DEBT
Some couples consider the strategy of staggering their debt to avoid affecting both of their credit scores. In this instance, one will file for bankruptcy knowing that eight years later, their debt can be discharged and they have a fresh start. This also enables the other spouse to file for bankruptcy later on if they can’t manage the debt on the first plan. Chapter 13 also has protection built-in for co-debtors – spouses – who have consumer debt but do not file. Creditors cannot come after the non-filing spouse in this instance since his/her spouse is the only one who had filed.
If you’re weighing your co-filing options, retaining the services of a seasoned bankruptcy attorney can be to your benefit. The law is complex, and only an experienced practitioner can take a look at your entire situation and advise you on which option is best.
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