Can a Husband and Wife split their joint bankruptcy?

It is possible to sever a joint case into two individual cases. Such requires approval of the court and requires a filing fee, which is intended as the difference between the fee paid for filing the joint case and the fees required to file two individual cases. Different jurisdictions take different approaches to splitting a joint case--in some, doing so may be an exceptional action where approval from the court is not easy to obtain.

Filing a joint case is unusual special privilege for spouses under section 302 of the bankruptcy code. Recognizing that spouses ordinarily have deeply intertwined finances, Congress created this option for the convenience of filers and others in the bankruptcy system. While administered together, the two debtors' bankruptcy estates remain distinct. This distinction can be best observed when individual property is sold in chapter 7, the individual creditors of the other spouse are not entitled to the proceeds.

Severing (sometimes "deconsolidating") joint cases is not particularly common. Most often, it occurs later in a chapter 13 case when desires or legal interests have diverged between husband and wife, e.g. one person wants to keep property while the other wants to surrender it. Frequently martial separation or divorce occur at the same time as the joint chapter 13 plan unravels. A conversion of one or both individual cases to chapter 7 is common, but not necessarily required. Once severed, each debtor has complete control of the direction of his or her bankruptcy case.

Instead of severing cases, sometimes one of the two joint debtors will elect to voluntarily dismiss his or her chapter 13 case, leaving the other spouse remaining in an individual case. The dismissed spouse would then have no bankruptcy protection. When this accomplishes the result desired, it can be simpler and cheaper than severing and proceeding in two cases.