Does Marriage Affect Your Bankruptcy Exemptions?

If you are like most married couples considering bankruptcy, you have probably wondered whether to file jointly or separately. Ultimately, this decision will depend on the amount of individual debt for each party as well as the amount of joint debt. There is a benefit of filing jointly that many people do not even consider.  If you choose to file your bankruptcy jointly, you are allowed to claim double the current exemption amounts for most of your property.

What are bankruptcy exemptions?

Bankruptcy exemptions, at least in Missouri, are determine by state law.  The State of Missouri allows you to protect certain property from creditors.  This includes $600 in cash and bank accounts, $3000 of equity in a car, and $3000 of household items.  This is also true if you are sued in state court and the creditor wants to levy your property.

Personal Property

This exemption applies to items such as furniture, health equipment, burial plots and jewelry. The amount each person is entitled to claim on the exemption is subject to change at the discretion of the state. Filing jointly will allow you to make more of your property exempt from your bankruptcy file. This is especially important in the case of Chapter 7 bankruptcy as you will have to hand all nonexempt property over to the trustee as a way to pay your debts.  As such, the $3000 household items exemption doubles to $6000 for a joint case.  Each person is allowed to claim the $3000 on items that he or she owns.  Since a husband and wife usually own household goods together, they get a $6000 exemption.

Beware though, if a married couple owns two cars but only one person has his or her name on the title.  A person may not be able to claim the $3000 car exemption on either of the cars of his or her name is not on the title.

Homestead

The State of Missouri allows a debtor to exempt $15,000 in equity in his or her residence.  However, this does not apply for each person, but for each case.  As such, filing a joint case does not allow the husband and wife to both claim $15,000.  The exemption can only be applied one time.  This can be problematic when the equity exceeds the amount allowed by the  bankruptcy exemptions.

Before deciding whether to file jointly or individually for your bankruptcy, it is important to consult an attorney.

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