How Does a Bankruptcy Affect the Spouse?

If you are married and considering filing for bankruptcy, you are probably wondering how it will affect your spouse. This is especially true if you plan on filing alone. There is a common misconception that if one person files for bankruptcy that the spouse is automatically responsible for the debt. This is not always the case. The only time the other spouse is responsible for the debt is if it was incurred under both names.

As an example, if the husband took out a credit card before getting married, that does not make his new wife automatically responsible for the balance just because they got married. On the other hand, if the couple buys a home, typically the deed and mortgage are signed by both, which will make both parties equally responsible for payment. Does that make sense to you?

So, if a husband files Chapter 7 bankruptcy without his wife, only his debts become fully discharged. And, debts that are in both names will then fall onto his wife. That said, only the filing husband spouse will see a bankruptcy on his credit report. If the non-filing wife spouse continues to pay in a timely manner, her credit report is spared. Nevertheless, if the bankruptcy does show up on the non-filing spouse’s credit report, it is vital to communicate the error immediately to the credit reporting agencies. The non-filing wife spouse should not see her credit damaged.

Another issue to consider is the assets. If the non-filing spouse owns property only in her name, it should not become a factor in the bankruptcy. On the other hand, under a Chapter 7 liquidation, property may be sold by the trustee to pay joint debt. So, all property held both by the filing spouse and non-filing spouse is at risk. But, as an example, if the non-filing spouse’s car is only in her name, it does not become part of her spouse’s bankruptcy estate.

Do you have questions? What haven’t we covered yet that is important to you? If you would like to talk about how a bankruptcy could affect your spouse, or a related topic, please contact us.

Harris Ammerman
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