Learn Whether Your Individual Bankruptcy Will Affect Your Non
By Cara O’Neill, Attorney
Spouses don’t always file for bankruptcy togetherespecially when one spouse has a good credit rating to preserve. Keeping it will often allow the couple to make a large credit purchase later if needed.
However, downsides exist. The debtor must include the non-filing spouse’s income in most cases, and the non-filing spouse will typically remain responsible for any joint debts. Read on to learn more about the effect of bankruptcy on your non-filing spouse.
If you’d like more filing considerations, see Should I File for Bankruptcy?
What Is A Disclaimer
A disclaimer is a statement in writing by the beneficiary officially refusing, declining, denouncing, or disclaiming the entirety or a portion of any interest from an inheritance. A disclaimer may be an undivided interest or fractional share of any property, identifiable assets, portion or amount of funds, etc. Pretty much if someone wants to disclaim something from an inheritance it doesnât matter what it is, as long as the disclaimer is properly executed the heir can refuse the inheritance.
Is Your State A Community Property State
This question will help you determine who is liable for your debt. If you live in a community property state, you and your spouse share assets and debts equally. If you live in a common law state, on the other hand, you only share debts or assets equally with your spouse if both your names are on the titles, contracts, or other ownership/liability documents.
Illinois is a common law state. If you live in Illinois, therefore, your spouse is only liable for your debt if they co-signed for the loan or credit.
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Does My Spouse Need To File Chapter 7 Or Chapter 13 Bankruptcy And If He/she Doesnt File Bankruptcy Do I Still Need To Provide Information About Their Income
Generally, in Illinois, when you are married, the debts your incur together with your husband or wife are debts that both of you are responsible for.; The Illinois Family Expense act says that debts incurred for the welfare of the family are the responsibility of both husband and wife.; A good example is medical bills.; If your child goes to the emergency room, both husband and wife are responsible.; If your husband has medical treatment, your wife is responsible, etc.; In the case of credit cards, you have to do more to have the other spouse responsible.; Many times, the husband or wife gets a credit card, and gives the other spouse a card to use, or allows them to be an authorized user.; In those cases, both spouses would be responsible, and it is best for both husband and wife to file bankruptcy. This is because if one person files, the creditor can still sue the other one.; So the bankruptcy would not protect the other spouse, unless it is paid in full.; With those types of debts, in most cases, it is advisable for both husband and wife to file for bankruptcy together.
There are other situations when it is best for only one spouse to file for bankruptcy protection, either Chapter 7 or Chapter 13 .; In those situations, as outlined below, even though only one spouse files for bankruptcy, the court still requires complete income and expense information for the other spouse.
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Filing Bankrupcty In Illinois: Real And Personal Property Exemptions
The biggest difference between filing for bankruptcy in Illinois and filing in other states is the type of property that is exempt, or protected from creditors. Some states allow use of a federal exemption, while bankruptcy filing law in Chicago and the rest of Illinois applies their own exemption statutes to all property in a bankruptcy case.
What should you expect to keep in a Bankruptcy filing in Illinois? See below:
Property That is Protected From Creditors in Bankruptcy Filings
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Secured Vs Unsecured Debt
During bankruptcy, your debts will usually be placed into one of two categories: secured and unsecured. The designation is important because secured and unsecured debts are treated differently in bankruptcy and will dictate how much of your debt can be eliminated.
Debt is unsecured when a creditor has no right to repossess your property when you fail to pay. Credit card debt, court judgments, and medical bills are among the most common types of unsecured debt. Because unsecured creditors hold no collateral for their debt, they are the most likely to be eliminated during bankruptcy. But some priority unsecured debts, like unpaid child and spousal support, can’t be eliminated.
A secured creditor has the right to repossess your property if you do not pay what you owe. These are generally loans where you have signed a contract giving the lender the right to seek a lien on the collateral property if you do not pay. Since secured creditors will retain their right to repossess the property in bankruptcy, you will usually need to give up the property or work out a repayment plan with the creditor. Home mortgages and car loans are the most common types of secured debt.
Can I File Bankruptcy Without My Spouse In 2021
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In a Nutshell
Yes, you can file bankruptcy without your spouse. A variety of factors play a role in determining whether filing bankruptcy with or without your spouse makes the most sense for you. This article will explore some of these considerations, then provide you with an overview of how to file bankruptcy without your spouse.
Written by Attorney Eva Bacevice.
Yes, you can file bankruptcy without your spouse. A variety of factors play a role in determining whether filing bankruptcy with or without your spouse makes the most sense for you. This article will explore some of these considerations, then provide you with an overview of how to file bankruptcy without your spouse.
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What Is The Effect On The Automatic Stay When Only One Spouse Files
The automatic stay protects you from creditors as soon as your bankruptcy case is filed. It stops almost every legal action, including a garnishment, foreclosure, repossession, and any debt collection lawsuit.
When you file for Chapter 7 bankruptcy, the automatic stay only applies to you. If you file without your spouse, theyâre not protected. If you file a Chapter 13 bankruptcy, there is a co-debtor stay, which protects anyone else listed on your debts.
In a community property state, the automatic stay extends to the community property of married couples. This generally means that the non filing spouseâs wages canât be garnished for a community debt.
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Need Help Filing For Bankruptcy In Illinois
If you are having trouble paying your bills, hiring an attorney to represent you in bankruptcy may seem like an expensive luxury when you could file on your own. However, even simple bankruptcy cases can involve complex court filings and strict deadlines. An experienced local bankruptcy attorney will help guide you through the filing process, represent you in court, and negotiate with creditors to ensure that you exit bankruptcy with as many assets as the law allows.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts , ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law you are researching.
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How Does My Bankruptcy Affect Our Property
If you own property together, but it’s worth less than the available exemptions, your bankruptcy will have no effect. If you or your spouse owns a home, it’ll be protected by the homestead exemption as long as it’s not worth too much.
It gets trickier if your spouse owns property that is worth more than what youâre able to keep during your bankruptcy. Depending on where you live, any property that your spouse purchased during your marriage may be considered to be joint property, even if your spouse purchased the property with a separate financial account.
Community Property States
This rule applies in âcommunity property states,â which include Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin. In these states, both spouses have joint and equal ownership over most property acquired in the marriage even if only one spouse is on title.
Debtors not located in one of these states generally do not have to worry about the trustee coming after their spouseâs property during a bankruptcy, even if the spouse owns property worth more than what the exemptions permit.
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Can Spouses File A Bankruptcy Together
Yes. The Bankruptcy Code allows spouses to file jointly for bankruptcy. The question of whether you and your spouse should file a bankruptcy together depends on whether you both are liable for the debts involved. You should remember that filing bankruptcy generally protects only the person who files for it.
Who Owes Most Of The Debt
If you and your spouse are struggling financially, but most of the debt is in your name, filing separately may make sense. You can theoretically obtain a debt discharge without interfering with your spouses financial affairs.
If, on the other hand, you and your spouse are equally liable for most of the debt, filing jointly may be a smarter option. If you are the only one who files, the court will only be able to eliminate your personal liability for the debt, and your spouse will still be responsible for their portion. Therefore, filing jointly can alleviate the financial burden for both of you while saving you the hassle, time, and cost of two separate bankruptcy petitions.
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Illinois Bankruptcy Exemption List
Here are some of the Illinois bankruptcy exemptions that bankruptcy filers often use. Spouses can double the exemption amount if they both own the property and file a joint bankruptcy case. Other exemptions you can use in addition to Illinois’s exemptions include:
- the federal nonbankruptcy exemptions, and
- the federal COVID-19 recovery rebate exemption .
Unless otherwise noted, all law references are to the Illinois Compiled Statutes , which you’ll find on the Illinois General Assembly website.
If You Were Eligible For A Chapter 7 Why Would You File A Chapter 13
Chapter;7 proceedings are not for everyone. The MEANS TEST is not the only reason to file for relief under Chapter;13. There are four major reasons to file Chapter;13:
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What Happens To Your Debt In Chapter 7
When you file for bankruptcy under Chapter 7, you can usually discharge most unsecured debt. You will usually have three options for secured debt:
- Return the property to the creditor. If you choose this option, you will lose the property but will usually be free from making any additional payments.
- Keep the property and continue making payments. This is sometimes possible when a state exemption covers the equity in the item.
- Purchase the property outright. This is rare in Chapter 7 cases because you usually need to make a cash payment and most of your cash assets will be turned over to the trustee.
What Happens To The Property I Own That Is Subject To A Lien
In some cases, the Bankruptcy Court can set aside or reduce a lien on your property. Additionally, individuals who want to keep the property secured by a lien can enter into reaffirmation agreements with the secured creditors. Under a reaffirmation agreement, the debtor promises in writing to continue to pay the amount owed to the creditor despite the bankruptcy and in return, the creditor agrees to not seize the secured property so long as the debtor continues to make the necessary payments. All reaffirmation agreements must be filed with the bankruptcy court. If you default on your payments under a reaffirmation agreement, the creditor can hold you liable on any deficiency and repossess the secured property accordingly.
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Do I Need A Bankruptcy Lawyer
Filing for bankruptcy is a very complicated process. Bankruptcy law varies depending on where the action is filed and which chapter of bankruptcy is being pursued. A local bankruptcy lawyer will know the particulars of filing for bankruptcy, can recommend what chapter of bankruptcy is right for you, and can ensure that your paperwork is filed correctly.
If creditors are still trying to collect after a bankruptcy action has been filed, a lawyer may be able to halt such collection efforts and may be able to get you some money damages.
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Impact Of The Family Expense Act
The Family Expense Act;provides that the expenses of the family and of the education of the children shall be chargeable upon the property of both husband and wife in favor of creditors and may be sued jointly or separately. First, it has to be a family expense that was incurred on the credit cards or, if it was not a family expense, that the expense was agreed to by the other spouse, or was for goods or merchandise purchased by or is in the possession of the other spouse. It may be rare for a creditor to come after a spouse that was not a named cardholder but it can happen and you must be aware.
Family Expenses under Illinois Law
- Illinois has determined that the following are family expenses:
- Medical bills,
- Rent for the family home,
- Repairs for the family home, and
- Wages for a domestic servant.
This list is not all-inclusive but just an example of those things that are considered family expenses in Illinois.
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Contact An Experienced Chicago Bankruptcy Attorney
For information on issues such as the question of “Can one spouse file for bankruptcy?” contact Edwin L Feld & Associates, LLC, at one of our Chicagoland area law offices. To schedule a free consultation with a lawyer at any of our convenient office locations, contact us toll free at 888-645-4357. You may also contact us by email.
How Will Filing Bankruptcy Affect My Spouse
If a husband files bankruptcy without his wife, then only the husbands debts are discharged in bankruptcy and the wifes debts are still unaffected. If the debts are held jointly, then the non-filing wife will still owe even after one spouse has filed bankruptcy.
When filing for bankruptcy, the bankruptcy filing will appear on the husbands credit, but would not appear on the wifes credit and there would be no adverse rating on her credit score because of the bankruptcy. A non-filing spouse should not have their credit damaged because of a spouse filing for bankruptcy.
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Does Single Spouse Bankruptcy Change The Nature Of Joint Debts
Under Chapter 7 bankruptcy, when a spouses debts are wiped clean, the creditor can go after the other spouse. However, a major advantage of Chapter 13 bankruptcy, where the debtor plans to repay her debts, is that the creditor will leave the co-debtor alone, as long as bankruptcy plan payments are timely deposited.