Marriage vows bind couples together for richer and for poorer. Bankruptcy laws, however, view married couples differently. Can one spouse file for bankruptcy without the other? How will bankruptcy affect your spouse?
You can file for bankruptcy as an individual or together with your partner. The path you choose depends on both of your financial situations. To learn more about filing for bankruptcy when you are married, speak to a Charlotte NC bankruptcy attorney at the Law Office of Jack G. Lezman, PLLC today.
What Are Bankruptcy Options for Married Couples?
A key question that faces married couples who are deep in debt is whether to file for bankruptcy separately or together. Couples have the option of filing a joint bankruptcy petition where a single bankruptcy case is filed for both partners. This has the advantage of costing less than filing two separate cases because only one filing fee is required. Additionally, both spouses benefit from an “automatic stay” that stops collection actions against both. Further, debts held jointly will be discharged through the jointly-filed bankruptcy.
One or both spouses also have the option of filing separate bankruptcy petitions. If one spouse files, only they will receive an automatic stay and only their debt will be discharged. The other spouse will not benefit from the automatic stay and will still be liable for any debts held jointly. Filing alone will work, however, if one spouse incurred debt in their name and is not burdened with jointly-held debt.
Whether you file bankruptcy alone or jointly with your spouse depends on three key considerations:
How Will the Bankruptcy Affect Both of Your Credit Scores?
Filing bankruptcy jointly with your spouse makes sense if you are both burdened by debt in both your names. If your spouse files but you don’t, your jointly-held debt will become your responsibility.
However, if you file jointly, both of your credit scores will be adversely affected. This will hinder your ability to buy a home, car, or start a business for several years following discharge.
If you and your spouse plan on doing any of these things, you may need to consider filing alone. It may be better for the more indebted spouse to file so the other spouse retains a good credit score. The spouse who doesn’t file can even help the other improve their credit score by co-signing on new debts and credit cards.
Thus, it’s important for both spouses to review their credit reports when considering whether to file bankruptcy alone or jointly. It’s also vital that the spouse who does not file reviews their credit report regularly. They will need to ensure that the other spouse’s bankruptcy does not show up on it.
Will the Bankruptcy Jeopardize Your Spouse’s Assets?
In deciding whether to file bankruptcy alone or jointly, the assets in your spouse’s name are important to consider. Your spouse’s assets are critical because Chapter 7 bankruptcy involves liquidation of assets within the bankruptcy estate. These assets will be sold to settle debts with creditors.
The bankruptcy trustee administers the bankruptcy estate, which includes the property of whoever files. So, if you file bankruptcy alone, any property your spouse solely owns will not be included in the bankruptcy estate. In this way, your spouse’s assets can be kept from being sold to settle your debts.
If your spouse owns significant property they don’t want to lose in bankruptcy, it makes sense to file alone. If you and your spouse don’t have a lot of assets individually or jointly, it makes sense to file together.
Will the Bankruptcy Affect Jointly-Held Debts?
Another important consideration in deciding whether to file bankruptcy alone or jointly is the amount of debt in your spouse’s name. It is not the case that simply because you are married, you are liable for your spouse’s debts. You and your spouse are equally responsible for debts that are in both your names.
Any debts you owe in your own name are your own responsibility. Debts your spouse owes in their name alone are their responsibility. So, credit cards opened by your spouse before you were married contribute to your spouse’s debt, not yours. A mortgage you acquired jointly after you were married is debt that belongs to both of you.
If you and your spouse are mainly burdened by debts held jointly, filing together makes the most sense. This way, you both can eliminate the debt and gain a financial fresh start. If you file alone, your spouse could be pursued for these jointly-held debts.
Learn More About How Bankruptcy Affects You and Your Spouse
If you’re unsure whether to file for bankruptcy alone or with your spouse, an experienced Charlotte NC bankruptcy attorney can help. At The Law Office of Jack G. Lezman, PLLC, we can help you decide which route will best meet your goals. Contact us today to learn more.