If you’re married and drowning in debt, it’s only natural to wonder how bankruptcy might affect your spouse, especially if you’re thinking about filing alone. The idea of bringing more stress into your marriage can be scary.
Fortunately, your spouse’s finances and credit can remain untouched even after you file. It all comes down to the particulars of your situation, such as how your debts are structured and whether your spouse is legally tied to them. Here’s more on this.
Joint debt vs. individual debt
Are your debts in your name alone or shared with your spouse? If you’re the only one listed on the credit card, loan or medical bill, your bankruptcy won’t affect your spouse. However, if it’s a joint account or they co-signed, the creditor can still go after your spouse for the balance, even after your obligation is discharged.
When your spouse’s credit might be impacted
Each spouse has their personal credit history and score, reflecting their financial activity. As such, filing for bankruptcy alone will only impact your credit score. However, since your spouse remains fully liable for shared debts, it can hurt their credit score if they struggle to keep up with payments. Creditors may also report missed payments on joint accounts, which can negatively affect your spouse’s credit.
What about property and income?
Assets solely in your spouse’s name or acquired before the marriage are generally protected when you file alone. However, shared property can be more complicated. Some shared assets could be partly included in the bankruptcy estate.
It’s also worth noting that if you live together, your spouse’s income may be factored into your means test to determine your eligibility, especially when filing for Chapter 7.
Take informed action
The unique considerations that come with filing for bankruptcy while married necessitate legal guidance. These issues can impact not only your financial outcome but also your spouse’s. Having qualified assistance can help you navigate the process with clarity and avoid unintended consequences for your household.