In ongoing civil cases, parties on either side can add other parties to the case (called “joining”) almost effortlessly. In bankruptcy, though, once a petition has been filed, joining spouses is not allowed, and other remedies must be sought. Why is this?
The answer is it has to do with how the Bankruptcy Code structures the filing of voluntary versus joint cases, but it’s not accidental. Section 301(a) says that a voluntary case may be filed by “an entity that may be a debtor under such chapter.” Looking to the definitions section of the Bankruptcy Code, a “debtor” and an “entity” can be a person, and a “person” can be an individual, partnership, or corporation. Thus, an entity that can file a voluntary case under section 301 can be a married person and not that person’s spouse.
Meanwhile, section 302(a) specifies that a joint case can be filed by “an individual that may be a debtor under such chapter and such individual’s spouse.” Notice that the language identifying the debtor mostly mimics the terms used in section 301, but then it adds the debtor’s spouse. This means joint cases must be filed only through the process outlined in section 302. No other language in the section allows debtors to join spouses to create a joint case from a voluntary case. Consequently, debtors in voluntary cases cannot amend their petitions to add a spouse as they could to change their addresses, add an unlisted debt, etc., as permitted by Rule 1009 of the Federal Rules of Bankruptcy Procedure.
There are a couple reasons the Bankruptcy Code is inflexible in joining spouses. One is the confusion caused to the creditors. For example, a creditor that may have been content to demand payments from a non-filing spouse on a joint debt might suddenly find that it’s facing the automatic stay against the spouse and the discharge of the debt. Another issue is the affects to the bankruptcy timeline. If debtors add their spouses, then suddenly the spouse may benefit from joining after the section 341 meeting of the creditors and a retroactive filing date that hastens the debtor’s next discharge.
Debtors’ spouses have two alternatives to achieving a joint case once a voluntary case has already been filed. One is for the debtor in the voluntary case to dismiss the case and then start over by filing a joint case. Two, spouses can file their own bankruptcies and move the bankruptcy court to consolidate the cases into one. Rule 1015(b)(1) of the bankruptcy rules allows just that. (Although, it refers to “husbands” and “wives,” which appears to cut against same-sex marriage in bankruptcy, but that’s a semantic error.)
If your spouse filed a voluntary petition and you think it might be advantageous to join it, then you’ll need to talk to an experienced New York bankruptcy lawyer to discuss which of these options is most appropriate for your case.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
