Effect On Your Spouses Credit
One spouse filing for bankruptcy alone will not affect their spouses credit score if the debt is only under your name. In cases of credit card debt where your spouse is the secondary or supplementary cardholder, their credit score may be affected.
You have to check the credit agreement to determine if your spouse is responsible for your debt.
Even if youre sure that your spouse is not liable for your debt, you should still ask your spouse to request a copy of their credit report after you file for bankruptcy to make sure that no erroneous negative marks are added to her credit report.
What Are Bankruptcy Options For Married Couples
A key question that faces married couples who are deep in debt is whether to file for bankruptcy separately or together. Couples have the option of filing a joint bankruptcy petition where a single bankruptcy case is filed for both partners. This has the advantage of costing less than filing two separate cases because only one filing fee is required. Additionally, both spouses benefit from an automatic stay that stops collection actions against both. Further, debts held jointly will be discharged through the jointly-filed bankruptcy.
One or both spouses also have the option of filing separate bankruptcy petitions. If one spouse files, only they will receive an automatic stay and only their debt will be discharged. The other spouse will not benefit from the automatic stay and will still be liable for any debts held jointly. Filing alone will work, however, if one spouse incurred debt in their name and is not burdened with jointly-held debt.
Whether you file bankruptcy alone or jointly with your spouse depends on three key considerations:
Mar Why Should Your Tax Returns Be Affected If Your Spouse Files A Bankruptcy
Why should your tax returns be affected if your spouse files a bankruptcy? If you file a separate tax return from your spouse, there should be no effect at all. If you file a joint tax return, however, you should be aware of the following:
1. Your last tax return must be sent to your spouses trustee and any of your spouses creditors that request it. Usually, your tax return is private, between you and the IRS. When a bankruptcy is filed, however, the person filing the bankruptcy loses his/her right to privacy. If it is a joint tax return, you lose that right also.
2. If it is a Chapter 13 bankruptcy, EACH of your joint tax returns due during the pendency of the bankruptcy must be sent to the Chapter 13 trustee for his/her review.
3. If it is a Chapter 7 bankruptcy, and there is a refund that hadnt been received prior to the filing of the case, the Chapter 7 trustee can take at least half of the refund. Unless, of course, your spouse can protect it with an exemption.
Next: How your spouses bankruptcy will affect your income and expenses.
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Can Spouses File Bankruptcy Separately
If you and your spouse are contemplating filing for bankruptcy, you may wonder if you are required to file jointly. Married couples can, in fact, file separately. When filing for bankruptcy in Jacksonville, married couples have the following options when choosing to file for Chapter 7 or Chapter 13:
- One spouse files individually
- Both spouses file individually
If My Spouse Files Bankruptcy Will I Be Bankrupt Too
Simply put NO! One person filing for personal bankruptcy does not automatically assign their spouse into a bankruptcy, full stop.
If both you and your spouse share the same joint debts or each have your own separate debts that youre unable to repay, you may both decide to start a bankruptcy at the same time, but this is your decision not a requirement in the law.
Sometimes one spouse may be in a position to repay a portion of their debt, but the other spouse is unable to afford any repayment in this situation one spouse may decide to file a Consumer Proposal and the other a personal bankruptcy.
What is a Consumer Proposal?
A Consumer Proposal isnt the same process as bankruptcy. A Consumer Proposal is a specialized debt consolidation tool you can access by working with a Licensed Insolvency Trustee. Essentially your consolidated debts are reduced down to what you can afford to repay , with the unpaid balance being forgiven by your creditors. Learn more about Consumer Proposals here.
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When Doesnt It Make Sense To File Without Your Spouse
Itâs rarely clear cut whether it makes sense to file with or without your spouse and in the end it depends on your financial situation and what state youâre filing in.
Here are a few common reasons folks want to file without their spouse that donât really hold up when you look at the full picture:
You donât want to impact your spouseâs credit : Unless they stay current and pay off all joint debt, their credit score will be negatively affected by your bankruptcy. Plus, your bankruptcy discharge wonât protect them from debt collectors.
You donât want to include your spouseâs property in the bankruptcy estate : All your marital assets are part of the bankruptcy estate whether you file together or not. Even if youâre not in a community property state, if you have joint property filing alone may not be enough to protect your spouseâs property interests.
How To Reduce A Nonfiling Spouse’s Income In Bankruptcy
Although you must include your nonfiling spouse’s income, you might be able to take deductions and pass the means test or lower your disposable income. The marital adjustment deduction allows you to deduct some of your spouse’s personal expenses if they’re paid with her own separate income. You can exclude that portion because it isn’t used to support your household.
For more information on how this works, read The Marital Adjustment Deduction on the Means Test.
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Community Property Vs Common Law Property States
The laws of your state affect what rights you have in property acquired during marriage. Common law property states follow the rules of equitable distribution. Community property states deem most property acquired during the marriage to be equally owned by both spouses regardless of who is on title. What property is considered part of your bankruptcy depends on whether you live in a common law or community property state.
To find out if you live in a community property state and for more information on the differences between common law and community property, see
Will Filing Bankruptcy Affect My Spouses Property
When you file a bankruptcy case without your spouse, the main concern for your spouse is protecting his or her interest in assets.
Regarding assets owned solely by your spouse, your bankruptcy filing does not jeopardize separate property owned by your spouse. However, as we discussed above, if you live in a community property state, all property acquired during the marriage is considered marital property, with very few exceptions. In a community property state, marital property can be used to pay debts in either spouses name if the debt was incurred during the marriage.
If you do not live in a community property state, your spouses interest in the marital property cannot be used to pay debts that are solely in your name. For example, if the Chapter 7 trustee liquidates an asset to pay your creditors, the Chapter 7 trustee must pay your spouse his or her one-half interest in the property from the proceeds of the sale.
Most spouses file joint income tax returns. Therefore, you may also want to read the IRS publication that outlines election by debtors spouse and later bankruptcy of a spouse. You should also consider that bankruptcy law does protect more than just a spouses refund.
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When Does Bankruptcy Makes Sense For My Family
If creditors can collect from jointly owned assets, bankruptcy might be a good way to protect those assets. However, your spouse’s income will be included in the bankruptcy, which might make it harder to qualify for Chapter 7 bankruptcy and might affect how much you must pay to unsecured creditors in Chapter 13 bankruptcy.
Can I File Bankruptcy Without My Spouse Filing
One of the most common questions married people ask me is can I file a bankruptcy without my spouse. A simple answer to this is yes. If youre married filing a bankruptcy in Oklahoma its not a requirement that if one spouse files so must the other. But, like everything in bankruptcy its important you understand all the consequences and potential advantages involved depending on your decision.
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Filing For Bankruptcy Individually When You Are Married
As discussed above, you may be able to file bankruptcy individually while married. It is also possible to file for bankruptcy as a couple. Filing as a couple may be an ideal option in the case of joint properties and debts. Single persons can also file for bankruptcy.
The mode of filing depends on where a married person lives and what property they own. You should determine whether you own the property jointly or individually with your spouse. It is advisable to file for bankruptcy individually as a way of protecting the other spouses credit.
An individual filing is also ideal in cases where each partner in the marriage owns separate properties or assets.
How To File For Bankruptcy Without Your Spouse
This article was co-authored by Clinton M. Sandvick, JD, PhD. Clinton M. Sandvick worked as a civil litigator in California for over 7 years. He received his JD from the University of Wisconsin-Madison in 1998 and his PhD in American History from the University of Oregon in 2013.There are 9 references cited in this article, which can be found at the bottom of the page. This article has been viewed 25,077 times.
Filing for bankruptcy is a procedure that can discharge your obligation to pay some or all of your debts. If you are married, you and your spouse need to review your assets and liabilities and decide if filing separately or filing jointly would make the most sense. If you own your property separately and have separate liabilities, then an individual filing without your spouse may be a good idea. But if most of your debts are jointly owed, filing alone might not accomplish what you hope. Talk it over with an attorney to make the best decision.
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When Shouldnt You File For Bankruptcy Without Your Spouse
Its not recommended to file bankruptcy without the spouse under these situations:
- You and your spouse have joint debts. Filing bankruptcy separately will still negatively affect your spouses credit score. The bankruptcy discharge will only apply to you but it wont protect your spouse from debt collectors.
- You dont want to include your spouses assets in the bankruptcy estate. Whether you file for bankruptcy, all your marital assets will be included in the bankruptcy estate if you live in a community state, even if the assets belong to your spouse alone.
The Codebtor Stay In Chapter 13 Bankruptcy
If you have joint obligations with your spouse, filing for Chapter 13 bankruptcy can protect your spouse from those creditors with the codebtor stay. The Chapter 13 codebtor stay prohibits creditors from coming after your codebtors during your bankruptcy. But keep in mind that creditors can ask the court to lift the codebtor stay if you don’t pay off the joint debt in your repayment plan.
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Filing Bankruptcy Without Your Spouse In Arizona
Spouses typically apply for loans and credit cards jointly, in both of their names. This makes each of them contractually liable for the debt. But occasionally debt is taken out in only one spouses name during marriage. In these situations, the spouse named on the debt is contractually liable for the debt, and the other spouse is not. People often mistakenly assume this means the un-named spouse has no liability for the debt, and therefore need not consider filing bankruptcy if the debt isnt paid. Unfortunately, that is not a correct assumption here in Arizona.
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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Filing Separately To Avoid The Tax Liability Of The Other Spouse
You may want to file separately from your spouse to protect yourself from the tax liability of your spouse. Small businesses and independent contractors are much more likely to fall behind on taxes than regular employees. If you work for a corporation that gives you a paycheck with your taxes already deducted, it’s unlikely you will have significant problems with the tax authorities. Business owners and independent contractors have to pay the taxes themselves. A business owner may do this partly by paying themselves a regular tax deducted paycheck. Still, both business owners and independent contractors often need to pay estimated taxes. These people do not have someone else doing it for them. They have to do it themselves. When operating your own business, there isn’t always enough money to pay all the bills on time. This tempts business owners to pay the tax authorities later. If the business fails, this leaves the business with a large tax liability. As a general rule, it’s a good idea to file separately if you work in a stable job, but your spouse is trying to start a new business. Another situation where it’s a good idea to file separately is if your spouse has a history of unpaid back taxes. You do not want to become entangled in your spouseâs tax problems.
Special Considerations in the Community Property States
Should I File Bankruptcy Jointly Or Individually In California
There are many factors that enter into whether or not its most beneficial to you to file jointly or individually in California, and they depend on your specific circumstances. But here are two to consider:
- In California, you may be able to take more in the way of exemptions if you file with your spouse, which is a good reason for filing a joint bankruptcy for many people. If you cannot exempt all property without filing jointly, then filing jointly with your spouse may be the better course. Discuss this with your attorney, because you have options regarding exemption methods in California.
- Since creditors cannot come after your community property even if just one of you file bankruptcy, it may be to your advantage to file individually in order to preserve your spouses good credit rating.
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How Long Does Bankruptcy Stay On A Credit History
A bankruptcy will be reflected on credit history for 6 years, but it is possible to apply for and obtain new credit within as little as two or three years . Many people who file bankruptcy go on to successfully get a new credit card, mortgage or vehicle financing within just a few years of bankruptcy discharge / completion.
My Spouse Is Filing For Bankruptcy Now What
As Licensed Insolvency Trustees we often receive questions from the spouse or common-law partner of someone who is considering filing for bankruptcy. Along with wanting to be supportive of their partners financial rehabilitation, they often have a range of concerns about how a bankruptcy will affect their own financial standing, credit or assets. Read on to help clear the air around some frequently asked questions you may have about your spouse filing for bankruptcy:
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What If A Spouse Has Property That Isnt Exempt
- If one of the spouses has property that isnt exempt, then it is often wise for that spouse not to file for bankruptcy
This is because only the property of the person that is actually filing for bankruptcy goes into the bankruptcy estate, where it will be distributed to creditors.
Thus having only one spouse file for bankruptcy can be a good way to protect non-exempt assets.
- If you want to do a joint filing to protect your spouses assets, then make sure you talk to an attorney to verify that the property isnt community property, or jointly owned
I often talk to people who think that a piece of property is not jointly owned, but legally speaking it is jointly owned.
Remember:
- If you are thinking about filing for bankruptcy, then it is important that you do not transfer any property out of your name
Transferring things out of your name while you are insolvent is called a fraudulent transfer and can have very serious consequences, even if you never end up filing for bankruptcy.
