Can I File Bankruptcy Without My Spouse in Michigan? Pros, Cons, and Things to Consider

It’s a common misconception that if one spouse files for bankruptcy, the other spouse must file as well. In fact, either spouse can file for bankruptcy without the other spouse being affected—which can be a good or bad thing, depending on the circumstances.

Many people are concerned how bankruptcy will affect their spouse. This blog will explain the bankruptcy options that might be available when one spouse is primarily responsible for the debt, and how a Michigan bankruptcy attorney can help.

Yes, It’s Possible to File for Bankruptcy Without Your Spouse

Short answer: yes, it is possible for one spouse to file bankruptcy individually. But filing bankruptcy solo isn’t always a wise choice.

Usually, if both spouses have significant individual debt, or most of the debt is jointly owned, it’s more efficient and less expensive to file bankruptcy together than to each file separately.

And if only one spouse files, the non-filing spouse is responsible for all debt that their name is on, including joint debts. Creditors can no longer pursue the filing spouse for repayment of debts included in the bankruptcy filing, but they can and will go after the non-filing spouse.

When Is Filing Bankruptcy Without Your Spouse a Good Decision?

Deciding whether you should file for bankruptcy without your spouse (or whether your spouse should file without you) usually depends on the nature of the debt. If most of your debt is joint debts, it might not make sense to file singly.

But there are some situations where the best option might be to file for bankruptcy individually, including the following.

The debts are mostly or entirely in one spouse’s name

Michigan is a common law property state, which means debts only belong to both spouses if the debt was taken on together. So, in Michigan, if only one spouse’s name is on the debt, then only that spouse is responsible for that debt.

If all or almost all the debt that could be discharged is in one spouse’s name, then filing for bankruptcy individually can keep the other spouse’s credit intact while still getting the maximum amount of debt relief (or close to it).

Your spouse expects to receive an inheritance or gift

Generally, inheritances and gifts are the sole property of the spouse who receives them. If you file for bankruptcy jointly and one spouse receives a financial “windfall” from a gift, inheritance, or other source (like a personal injury settlement), then, unless the funds are exempt under federal exemptions or Michigan exemptions, that spouse may have to turn over those funds to creditors.

One spouse owns a separate business

Business ownership can make filing for bankruptcy more complicated. If one spouse owns a profitable business, that ownership interest may impact several aspects of a potential bankruptcy, including which chapter to file. It’s important to review a business ownership interest with an experienced bankruptcy attorney.

Your spouse has already filed for bankruptcy or might need to in the future

When a person receives a discharge of debts from a successful bankruptcy filing, it starts a waiting period that must expire before they can receive another discharge by filing for bankruptcy again.

The length of the waiting period depends on the type of bankruptcy:

• Filing chapter 7 after chapter 7: Eight years
• Filing chapter 7 after chapter 13: Six years
• Filing chapter 13 after chapter 7: Four years
• Filing chapter 13 after chapter 13: Two years

So, if your spouse isn’t eligible for a discharge, it might not make sense for them to file.

Note that receiving a discharge of debt isn’t the only reason to file for bankruptcy. Filing chapter 13 bankruptcy can reorganize your debt and grant protection from wage garnishments and other debt collection actions while you repay. So, there are times when people might want to file for chapter 13 bankruptcy even though it won’t discharge any debts.

Your spouse doesn’t want to file for bankruptcy

Filing for bankruptcy can be a deeply personal decision. If your spouse isn’t comfortable filing for bankruptcy and going through the bankruptcy process, filing individually gives you the option to move forward with the process while your spouse makes their own decisions in their own time about how to handle any financial issues.

How Will It Affect My Spouse if I File for Bankruptcy Individually?

If only one spouse chooses to file for bankruptcy for their individual debts, the other spouse’s credit history, credit score, and debts won’t be affected in most cases. However, any jointly owned property will become part of the bankruptcy estate, even if only one spouse is filing. And the other spouse may still have a role to play in the process, which will depend on the type of bankruptcy filing.

• Chapter 7: Chapter 7 bankruptcy, also called a liquidation bankruptcy, is mainly about getting rid of unsecured debts like credit cards, personal loans, and medical bills. In a chapter 7 filing, the other spouse will have to provide proof of their income to make sure the couple’s income meets the means test for bankruptcy filing.
• Chapter 13: Chapter 13 bankruptcy involves restructuring debts and a court-ordered repayment plan. After the repayment period ends, eligible debts get discharged. Even if only one spouse files for chapter 13 bankruptcy, their repayment plan will be based in-part on the joint household income. 

While joint property will be included in either spouse’s individual bankruptcy case, the spouse who does not file should, in most cases, be able to keep their separate property and a portion of the joint property.

Can I Transfer or Re-Title Property and Assets to My Spouse to Avoid Including Them in My Individual Bankruptcy Filing?

Absolutely not. Transferring assets to avoid creditors may result in the Trustee or creditors seeking to avoid the transfer. In some instances, transferring assets may be viewed as bankruptcy fraud, which can lead to consequences that include:

• The cancellation of your bankruptcy filing and the denial of any potential debt relief it would provide
• Fines of up to $250,000
• A prison sentence of up to five years

If you commit bankruptcy fraud, the trustee (the person who oversees and manages your bankruptcy process) will most likely find it. Resolving avoidable transfers can be complex, stressful, and expensive. It’s important for you to work with an experienced bankruptcy attorney to identify and mitigate these issues before filing your case.

So, if you’re thinking about transferring assets to your spouse (or to anyone else) to try to hide them or protect them from an individual bankruptcy filing, just don’t. It won’t work, and the consequences once the activity is discovered could be severe.

A Bankruptcy Attorney Can Help You Figure Out the Best Option for Your Situation

The bankruptcy process gives filers a lot of options to consider, including which type of bankruptcy to file and whether to file with their spouse. Each choice comes with potential benefits—and potential pitfalls.

Bankruptcy law is incredibly complex, and figuring out the right decision for your case can be very challenging without help from a specialist who has years of experience. But with an experienced bankruptcy lawyer on your side, you can feel confident that you’ve got a guide who will help you make the right decisions to get your financial situation back on track.

CBH Attorneys & Counselors: West Michigan’s Experienced, Compassionate Bankruptcy Lawyers

The compassionate bankruptcy lawyers at CBH Attorneys & Counselors have years of experience helping individuals and businesses of all sizes work through their debt problems and come out as strong as possible on the other end. To schedule your consultation with our team in either Grand Rapids of Kalamazoo, fill out our quick contact form today or call us at (616) 608-3061.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.