Married and single persons face different challenges when filing for Chapter 7 bankruptcy. If you are married, you shouldn't use a single friend's bankruptcy process as a yardstick for your application. Some of the unique challenges to prepare for include:
Passing the Means Test
Chapter 7 bankruptcy process has a means test, which is designed to ensure that only those who can't truly pay their debts get the discharge. If you have a reasonable disposable income, which is the money you are left with after paying your allowed monthly expenses, then you may not qualify for the bankruptcy. The limit of the maximum disposable income you may have and still qualify for the bankruptcy discharge depends on different issues including your metropolitan region.
Unfortunately, the bankruptcy court doesn't just consider your individual income when calculating your disposable income; even your spouse's income is computed. As you can imagine, it's highly unlikely that your combined incomes will fall short of the limit set by the bankruptcy state, and this may bar you from filing Chapter 7 bankruptcy.
When you file for bankruptcy, your assets are used to pay some of your debts and the rest are forgiven. However, the law recognizes that it would be unfair to strip a person of all their assets, including the clothes on their backs, and this is the reason for the exemptions. In Chapter 7 bankruptcy, exemptions allow you to keep certain assets even after the discharge.
As a married couple, you can save considerable assets by using double exemptions, a process where each of you gets to claim a certain amount of assets as exemptions. The law allows this because it recognizes that two people own and need more assets to survive as compared to an individual.
Unfortunately, doubling of exemptions isn't a given; some states do not allow it. Also, you are only allowed to claim double exemption on the property you jointly own. This means you may lose considerable property if you don't meet these two requirements.
Protecting Spouses Property
If you live in a community property, your spouse may lose some of their assets even if you are filing for individual bankruptcy. This is because, in a community property, you are both responsible for all the debts acquired during the marriage. At the same time, you both own all the assets you jointly acquired during the marriage.
These are challenges, but there are ways of getting around them; you just have to know what to do. For example, just because your spouse has a high income doesn't mean you will automatically fail the means test. The law disregards the portion of your spouse's income that they use for their personal expenses, such as their student loans. This means that with an experienced bankruptcy attorney, many married couples still qualify for Chapter 7 bankruptcy.