Marriage means much more than just living with someone, it means sharing a life together and that life includes your finances. Still, sometimes one spouse may need to declare bankruptcy to get out from under their debts, even if husband or wife does not. There are any number of reason why this may be the case. The filing spouse may have racked up credit card debt as a college student or may have incurred medical expenses that the other spouse isn’t liable for. If you are married, you often can file for bankruptcy without your husband or wife. Even when you file and individual bankruptcy case, it may still have a profound effect on your non filing spouse.
How Bankruptcy can Affect your Spouse:
Generally speaking, if you are filing for an individual bankruptcy case, it will not have much of an effect on your spouse in many cases. One of the areas in which it may have an impact is If you have joint debts discharged in the bankruptcy. By doing this, the bankruptcy may appear on your spouse’s credit regardless of whether they have filed.
Also, when you file for bankruptcy, it only eliminates your personal debt, but your husband or wife is still obligated to pay back their own debts and any joint debts that they may be on with you. Your creditors can pursue legal action against your spouse to collect your joint debts once you have filed for bankruptcy. While this past statement is true if don’t life in a community property state, if you do live in a community property state and discharge the debts you owe jointly with your spouse, the creditors cannot pursue collections against your marital community property after your bankruptcy. In this case, your spouse benefits from discharge of your joint debts.
Filing for Chapter 13 bankruptcy protection can protect your spouse from creditors with the Co-Debtor stay. A Co-Debtor protects the debtor against almost all types of debt collection activity by virtue of you having filed for protection yourself. A chapter 13 also prohibits creditors from pursuing your co-debtors during the course of your bankruptcy. However, in a chapter 7 bankruptcy, the co-debtor stay is not included. At that point a collector will not be able to collect the debt from you, but it can collect it from your spouse.
Finding Financial Freedom:
Filing for bankruptcy is a last resort for many and a challenging process for everyone, especially if affects your loved ones. Understanding what your options are helps you both make good decisions that can get you back on the road to financial prosperity and security. If you are considering filing bankruptcy, contact our experienced bankruptcy attorneys today so they may explain the different options you have available to you under the law. Harmon and Gorove has helped thousands of families recover from difficult financial situations over the course of the last 35 years. Contact our office today for a free, no obligation consultation.