Lines Of Credit In Both Spouses Names
A Chapter 13 bankruptcy filing may become more complicated and hazardous for the non-filing spouse if the unsecured debt has both the filing and non-filing spouses names on the agreements. If the filing spouse does not fully repay the jointly held unsecured debt in their Chapter 13 bankruptcy, the creditor may have the right to pursue the non-filing spouse for payment after the balance of the debt has been discharged. This could also be the case for any secured property that is surrendered during the bankruptcy. For example, if the couple jointly held a mortgage on a property that had a deficiency balance after it was auctioned off AND that balance was discharged at the end of the Chapter 13 bankruptcy repayment term, the mortgage company may pursue the non-filing spouse for payment after the bankruptcy case is closed.
On the other hand, if the bankruptcy debtor repays all of his debt in that 3 to 5 year period, the non-filing spouse wont have a problem but that is not likely because that rarely happens. Before filing for bankruptcy, married debtors need to candidly discuss the ramifications of bankruptcy with both their non-filing spouse and their bankruptcy attorney. In some cases it may actually be beneficial for a married debtor to file a joint bankruptcy so that they can protect their spouse and by extension the assets of their household.
Does My Spousal Income Count Towards The Bankruptcy If He Or She Does Not File With Me
While filing for individual bankruptcy, it is important to note that spousal income counts even if he or she is not part of the petition. Income generated by a spouse dictates the type of bankruptcy one gets to file.
One can only qualify for an individual bankruptcy filing if their spousal income is below a certain amount under Chapter 7. For Chapter 13 filing, a spouses income must be above a certain income level. It is common for a bankruptcy attorney to ask for income generated by each spouse. You will find that both incomes are used to evaluate eligibility as it pertains to the individual filing.
Special Consideration For Tenancy By The Entirety
Certain states allow married couples to hold property in tenancy by the entirety as a single marital entity. Depending on your state, tenancies by the entirety may be exempt in bankruptcy when only one spouse files, but fair game if both spouses file.
To learn more about other bankruptcy options for married couples, see our articles in Filing Considerations for Married Couples.
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Filing For Chapter 13 Bankruptcy Without Your Spouse
Chapter 13 is considered the repayment bankruptcy. In this filing, the court works out a repayment plan for debt based on your income and financial situation. Creditors may not receive everything they want, but they will receive something.
Chapter 13 bankruptcy includes what is called a co-debtor stay. This is a good thing. It protects your spouse or partner as part of the automatic stay. The co-debtor stay prevents creditors from pursuing debt for the spouse for the duration of the bankruptcy. There is no co-debtor stay in Chapter 7, only in Chapter 13, so consider carefully which is better for you if you need to file. It also only protects individuals, not businesses.
The co-debtor stay does not release the spouse from obligations for joint debts. The co-signer for any debt remains responsible for paying it. As long as the spouse meets those obligations, their credit score will not be affected.
What Happens To Your Information
Any previous name included in the bankruptcy petition will appear on the bankruptcy order, and in the:
- notice of your bankruptcy, which is permanently recorded in the Gazette but excluded from search engine results one year and three months after publication
- Individual Insolvency Register which will be removed within three months of your discharge
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What Can I Do To Protect Myself If My Spouse Files For Bankruptcy
If a spouse files for bankruptcy, the non-filing spouse should consult with bankruptcy counsel to see if there will be any impact on them. While often there may not be any impact at all, in some circumstances, a filing spouses bankruptcy may prohibit a non-filer from proceeding with collection activity or undertaking other actions on the way to separation. There also may be impact if the non-filing spouse remains obligated on loans that the filing spouse has discharged. It is important to be mindful that even if an order in the divorce action requires one spouse to make the payments on a particular set of debts, the divorce order does not change the contractual obligations between the lender and the borrower. Even if one spouse is ordered to make all the payments in a given set of debts, the creditor could sue the other spouse if they were signed as the borrower on the loan or credit card.
What Happens To Your Home
If you own your home it can be sold if it is the only way to pay your creditors.
If youre the only owner of the property:
- the value of the property after any secured debts have been paid transfers to the trustee. This is known as the beneficial interest and is sometimes called equity
- the legal title transfers to the trustee and a bankruptcy restriction is added to the land registry record. This will stop you from selling your home or making deals connected to it
The restriction will be removed once the trustee has been paid for their interest in the property.
If you own the property with someone else:
- your share of the property after any secured debts have been paid transfers to your trustee. This is known as the beneficial interest
- a Form J restriction is added to your Land Registry record and the trustee will be told of any deals affecting the property, including a sale
You can still sell the property, but the trustee will get your share of the money from the sale. The Form J restriction will be removed once the trustee has been paid this money.
The sale of your home
The trustee cant usually sell the property without your agreement for a year from the date of the bankruptcy order if you have a partner or children living with you.
You can stop a sale taking place later if a family member or friend buys the beneficial interest in your home. The buyer should contact the trustee.
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What That Means For Your Case
The good news is that you can declare bankruptcy without needing to include your spouse. Its important to note, though, that your spouse will still be responsible for repaying any of the debts you incurred together. In some cases, it might be in your best interest to file for bankruptcy together so you can double your exemptions.
In others, particularly in cases where one spouse has a number of non-dischargeable debts, such as tax debts, child support, or alimony, it would be well-advised to have only one spouse declare bankruptcy.
Youll also still need to provide your spouses information on your bankruptcy petition, even if they arent going to be filing with you. This information will be included in your disclosure statement and will include your spouses income, debts, assets, and expenses so the courts have a complete picture of the financial situation in your home.
Your spouses information will be used to determine your eligibility, which is why youll need to speak with your attorney to determine whether your spouses assets, debts, and income will impede the likelihood of your bankruptcy petition being granted.
Does One Partner’s Credit Card Debt Become A Debt Of The Marriage
If your wife is in financial difficulty, sometimes it makes sense to have her file bankruptcy by herself. However, in some cases your wife filing bankruptcy could have serious financial ramifications for you individually. Factors that determine the effect of your wife’s bankruptcy on you include your state of residence, how your debt is titled and the bankruptcy chapter your wife files.
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What If My Spouse Has A Supplementary Credit Card
Supplementary credit cards are very common among spouses.
A supplementary credit card has the same account number as the primary credit card. So, if your spouse has used a supplementary credit card with their name on it, they may be considered jointly responsible for all debts accumulated under that credit card account. One way to determine if your spouse is liable is to have your spouse call the credit card company and ask. If the credit card company says we are not authorized to speak to you because this isnt your credit card then you can be reasonably ascertain that your spouse is not liable for the card. If the credit card company will speak to your spouse, it is likely that they are liable for the full balance owing on the card if you declare bankruptcy.
The Benefits Of Filing A Joint Bankruptcy Petition
First, you should address the positive aspects:
- Joint Bankruptcy Will Save You Time & Money – Whether you decide to file together or individually, the bankruptcy filing and attorney’s fees will be the same. This means that you could save time and money if you and your spouse file jointly.
- Joint Bankruptcy Eliminates Both Parties’ Debt – Since both spouses would be responsible for repaying any shared debts incurred over the course of their marriage, it may be counteractive for one spouse to file individually. The non-filing spouse would still be liable for their separate debts and their share of any joint debts that were not discharged during the bankruptcy.
- Joint Bankruptcy is More Efficient –Filing for bankruptcy is no simple matter. You must provide extensive financial documentation in your petition, and you will be required to attend at least one hearing with a bankruptcy trustee. For this reason, it may be more efficient for you and your spouse to file jointly, as you would only be required to do this once.
- Joint Bankruptcy Protects More of Your Property – In the state of Michigan, married couples that file a joint bankruptcy petition will be allowed toprotect more of their property. For example, you and your spouse could each exempt up to $3,250 in motor vehicle equity.
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Spouses With Separate Households
You do not need to include your spouses income in the bankruptcy filing if you and your partner maintain separate households. Some couples support separate households. Sometimes couples have jobs in different locations. Other times, a separate residence is needed to ease marital tensions. Whatever the reason, if your marriage or partnership includes separate households, you do not need to include your spouses income when filing.
Your Interview With The Official Receiver
If your bankruptcy is approved, youll have an interview with the official receiver. If youve presented your own bankruptcy petition, this may happen directly after the bankruptcy order is made. Alternatively, your letter from the official receiver may invite you to an interview either in person or by telephone. If offered a telephone interview you can ask to be interviewed in person if you prefer.
If you have been made bankrupt by one of your creditors the official receiver may also contact you by telephone to find out if there is anything that needs to be sorted out urgently.
You must attend the interview and cooperate with the official receiver. If you dont, your bankruptcy could be extended beyond the normal 12 months and you could face an examination in court. The more organised you are, the more straightforward the process will be.
Before the interview, telephone the official receiver to confirm or rearrange the appointment let them know if:
- you require special facilities
- there is anything that needs to be sorted out urgently
- you need more time to gather the paperwork for the meeting
If you have been sent a questionnaire, fill it in, noting anything you dont understand .
Collect together all the paperwork you have been asked to take to the interview or have with you during the telephone call.
Face-to-face interviews may take 2 to 3 hours.
After you arrive:
Telephone interviews take at least 30 minutes.
The examiner will:
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Joint Debts In Bankruptcy
Debt problems cause stress for the entire family. One of the common concerns is how will bankruptcy affect my spouse if I declare personal bankruptcy? Do creditors pursue your spouse? Will it affect their credit rating?
To understand how bankruptcy will affect your spouse, it is important to understand the difference between joint debt and personal debts.
Your bankruptcy only affects your debts. As long as your debts belong solely to you, then claiming bankruptcy should have no impact on your spouse or their credit rating, but sometimes the answer is not quite that simple.
If your spouse has not co-signed or guaranteed any of your debts then those debts belong solely to you.
However, if they have guaranteed or co-signed any of your debts, those debts are no longer just yours. Now your spouse will become fully liable if you file for bankruptcy. Your creditors will pursue your spouse for full payments, even though your bankruptcy will eliminate your responsibility to repay the debt.
In situations where you have significant common or joint debts, your spouse may need to declare bankruptcy if your spouse cannot afford to repay those debts on her own. It is possible to declare a joint bankruptcy or joint consumer proposal with your spouse. This can lower the overall cost of these proceedings for the two of you.
Things You Should Know If You Are Married But Want To File Bankruptcy Alone
| Oct 18, 2017 | Uncategorized
This post lists three things you should know if you want to file for bankruptcy without your spouse. Contact Phoenix Law for more information today.
Using bankruptcy to help you get out of debt is something you could consider if you are overwhelmed with bills you cannot pay. If you are married, but you are considering filing individually, without your spouse, here are some of the main factors you should know before you sign the bankruptcy documents.
1. You Can File Individually If You Are Married
Married couples have the freedom to file for together or individually. Couples typically file together when they have joint debts, but spouses can file by themselves if they choose to.
There are several reasons a spouse might want to file individually, and you might have your own reasons. For example, if you want to buy a house in the near future, you could prevent damage to your spouses credit if you file individually, and put the house in only your spouses name.
If both spouses want to file for bankruptcy, it is always better to file jointly. By filing jointly, you can pay just one filing fee and one fee for the legal assistance from a lawyer.
However, it is important to understand how filing individually could affect your spouse, and you can find out more about this by meeting with a bankruptcy lawyer.
2. Joint Debts Do Not Get Fully Discharged
3. Your Spouses Income Counts
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Can A Person File For Bankruptcy Without An Attorney
Many people file for Chapter 7 bankruptcy without an attorney. In fact, in some districts, a whopping 28% of bankruptcy filings were by pro se litigants . Some people represent themselves because they cant afford the attorney fees. Others have simple cases and dont feel the need to hire an attorney.
Will My Spouse Be Responsible For Joint Debts If I File An Individual Bankruptcy Case
In the case of joint debts, an individual bankruptcy filing does not protect your spouse from debt collections for joint debts. An individual bankruptcy filing only impacts your personal liability for the debt. Creditors cannot attempt to collect discharged debts from the debtor.
However, if your non-filing spouse is a co-debtor, the creditor can take all legal actions to collect the unpaid debt from your non-filing spouse. Actions include, but are not limited to, debt collection lawsuits, wage garnishments, repossessions, foreclosures, levies, and seizures. The creditor may need to wait until your bankruptcy case is closed, or it can petition the court to proceed with collections against your spouse for the joint debt.
It is important to read the credit agreement for each debt before filing bankruptcy. In some cases, your spouse could be responsible for a supplementary cardholder account. A supplementary cardholder has a credit card in his or her name with the same account number assigned to you as the primary account holder. This situation usually happens when a spouse applies for credit and answers yes when the company asks if the person wants a card for his or her spouse.
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Alimony And Child Support
Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, alimony and child support payments must be paid before all other creditors, including taxes. Even though alimony is not dischargeable, this doesnt mean you will continue to receive the same amount you did before your ex filed for bankruptcy. In most states, alimony obligations can be modified if the ex-spouse submits a request to the bankruptcy court. The bankruptcy court may determine a new amount or establish an agreement with you based on your ex-spouses petition.
There are some rare circumstances in which alimony can be discharged, so be safe and contact your divorce lawyer to ensure your alimony or support payments are protected.