Is My Spouse Responsible For My Debts If I File Bankruptcy Without My Spouse
In the case of joint debts, an individual bankruptcy filing does not protect the other partner. Individual bankruptcy filing only affects personal liability. In this case, creditors would still be able to pursue the other spouse to recoup any money owed.
However, creditors cannot pursue collections on debts from a spouse when the debt is in the name of the person filing for bankruptcy.
If you live in a community property state such as Arizona or Texas, creditors can still go after your spouses separate property to settle part of the debts after bankruptcy. The law, in this case, assumes that all property acquired during marriage is community property.
Community Property In A Bankruptcy Case
Even though Ellen doesn’t file bankruptcy, all the community propertyincluding her interest in the communitybecomes a part of the bankruptcy estate.
Because they’re in a community property state, community property that is not exempt could be seized by a trustee and sold to benefit Mark’s creditors. If Ellen chooses to file bankruptcy also, depending on the state, she can apply her own set of exemptions .
Can I File For Bankruptcy Without My Spouses Knowledge
Yes, it would be possible for one spouse to file for bankruptcy without the other partner ever finding out. However, Chapter 7 bankruptcy uses income as a test for eligibility and utilizes income garnishment as a means of settling debt. The non-filing spouse will certainly notice if the bankruptcy court for debt repayment is garnishing their paychecks.
Even outside Chapter 7 bankruptcy, there are plenty of other ways for a spouse to discover his or her partners financial situation. Hiding bankruptcy is a temporary solution at best and is not healthy for any marriage.
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Can I File For Bankruptcy Without My Spouse
Even though you are married both spouses are not required to file a bankruptcy Case. Filing a bankruptcy case without your spouse can provide the two of you with significant protection from your creditors even though only one spouse files for Bankruptcy relief.
The spouse who files for Bankruptcy relief can expect to get a discharge that will wipe out their personal liability for all the listed debts that are dischargeable by law. Bankruptcy will not eliminate the liens securing such debts, but such claims will be limited to the asset that is collateral for the particular debt.
Your discharge will also protect the community property of your marriage. That protection extends to what you owned when you filed bankruptcy and to any community property that you and your spouse acquire in the future.
Your non-filing spouse will not be discharged from his/her personal liability on debts, even if you list the debts in your case. Your spouses future earnings during marriage are protected, but your spouse remains liable in the listed debts. Only the non-filing spouses separate property can satisfy such liability.
Your spouse may get demands from the IRS for payment of taxes that you discharged in your case. The Tax Collectors can make the demand, but they are not allowed to garnish your spouses paycheck or levy a bank account that has only community property in it to collect the tax.
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.
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What Assets Are Part Of The Bankruptcy Estate In California
California is a community property state, which means that barring an agreement to the contrary, property acquired during the marriage normally belongs to both spouses no matter whose name is on the title. That means whether you file a bankruptcy jointly with your spouse or you file individually, all that community property is part of your bankruptcy estate. When you file individually in a community property state like California, a lot more property becomes part of the bankruptcy estate and subject to bankruptcy law than would be the case if you filed individually in a common law state. Your California bankruptcy lawyer can explain what property can be protected by bankruptcy exemptions.
Can Creditors Come After My Spouse If I File For Bankruptcy
When you file for bankruptcy, it eliminates only your personal liability for debts that are discharged in your case. Your individual bankruptcy doesn’t wipe out your spouse’s obligation to pay back his or her own debts or any joint debts you have together. This means that creditors can still pursue your spouse to collect your joint debts.
But there is an exception. If you live in a community property state and discharge the debts you owe jointly with your spouse, those creditors can only go after your spouse’s separate property after your bankruptcy. Because almost all property your spouse acquires during the marriage is community property , your spouse essentially receives the benefit of your discharge as well for your joint debts. This is commonly referred to as a phantom discharge.
For more information on how joint debts are treated in Chapter 7 bankruptcy, see What Happens to My Cosigner in Chapter 7 Bankruptcy?
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What Happens When One Spouse Files Bankruptcy Without The Other Spouse
There is no requirement that a husband and wife jointly file bankruptcy. If most debts are owed only by one spouse, it may be appropriate for that spouse to file for bankruptcy alone. However, if one spouse does file for bankruptcy in order to discharge debts, the other spouse may be held responsible for repayment of some debts, such as jointly-owned credit card debt or medical debt. This is a difficult and tricky legal situation to navigate, and it is in your best interest to contact a knowledgeable bankruptcy attorney in order to determine what each person’s liability will be.
If the indebted spouse has most of the debt in his or her name alone, joint filing may not be the best option. The other spouse is not responsible for paying off the debt. Also, it may be the case that the spouse who is not in debt has numerous protected assets or may stand to inherit a great deal of money. In that situation, a joint filing may not be advisable.
A joint bankruptcy filing may be the best option if the non-insolvent spouse has few resources or has all his or her assets intermingled with the filing spouse. Filing jointly avoids unpleasant situations where the creditors attempt to reclaim the filing spouse’s debts by going after the non-filing spouse’s assets. Filing jointly for bankruptcy often affords couples a more simple financial transition.
It is in your best interest to discuss your choices with an experienced bankruptcy attorney in order to determine what your best options are.
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.
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What Is Community Property And How Does It Affect Bankruptcy
Texas is a community property state. In a community property state, any joint property owned by both spouses may be a part of the bankruptcy estate, even if only one spouse is filing the claim. In this case, one spouse filing for bankruptcy can affect the other spouse in that the spouse may lose that property.
So while one spouse can file for bankruptcy without it going on the others credit report, it cans still affect the other spouses property. The spouse filing for bankruptcy should speak with an attorney about options available to protect property when filing, such as Texas bankruptcy exemptions or federal exemptions. If all joint property is protected by bankruptcy exemptions, this might not affect the other spouse who is not filing for bankruptcy.
Can I Possibly Be Tied To My Ex
Spouses can be indirectly connected when just one spouse files for bankruptcy. Even when one spouse files for bankruptcy, both spouses income has to be disclosed in the bankruptcy financial forms. The means test and other financial disclosures in bankruptcy are based on household income and not just the filers income. The second connection between a filing spouse and a non-filing spouse is that if both spouses are responsible for a given debt, then just because one spouse has filed for bankruptcy does not excuse the non-filing spouse from the obligation. However, in spite of these connections, the non-filing spouse should not be impacted on their credit report or their individual obligations.
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What About Debts After You Were Married
If you ran up the bills during the marriage, even though your spouse did not sign for the debt, or even know about it, your creditors may be able to collect from your spouse. Many states have “family expense” laws that make one spouse responsible for the debts of another if the debts were incurred for family purposes. The theory is that each spouse owes a duty to immediate family members to support them. Food, clothing, rent, medical bills and household items can be the responsibility of the other spouse.
Joint Property Of Marriage
If you and your spouse own property together, that property may be included in the bankruptcy estate and be potentially available to pay creditors.
In community property jurisdictions such as California, both halves of the community property comes into the estate: all of the community property is available to pay community creditors and any other creditors of the spouse who has filed.
So the filing of one spouse could have significant impact on the other.
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If Filing Bankruptcy Consider Spouses Assets
Beyond just debt, another issue for married couples to consider when evaluating bankruptcy is how assets are held. If one spouse owns property in her name only and doesnt file bankruptcy, it wont become part of the bankruptcy estate.
This could be an important factor depending on the value of the asset, because Chapter 7 is technically a liquidation. All the property you own that exceeds the value of your states exemption laws is subject to sale by the bankruptcy trustee. However, the trustee only has jurisdiction over the property of the party that files. For example, a wifes home that is only in her name does not become part of her husbands bankruptcy estate.
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 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.
Can You File Bankruptcy Without Your Spouse
Many people mistakenly believe that if you are married and filing for , you must do so jointly. You have several options after determining that bankruptcy is the right choice. If you are unmarried, you will file independently. If you are married, you may file jointly or as an individual. Both spouses may also choose to file bankruptcy separately, at the same time. Strategically, one option may suit your situation better than the others, depending mainly on location, debts, and assets.
Texas and the Other Community Property States
Texas, along with nine other states, is a community property state. Meaning, any assets or property acquired during marriage belongs equally to both spouses, even if only one spouses name is on the contract. The assumption is that all decisions are made together, rather than individually, and both parties are contributing their fair share. Any items owned before the marriage are excluded from the community property, as are any items inherited or given only to one spouse after the union began this is separate property.
More Property Is at Risk
The Affected Debts
What Is Right for You?
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Does Filing For Bankruptcy In Canada Affect My Spouse
Filing for bankruptcy in Canada does not directly affect your spouse. Your debts are your debts only you are responsible for them. If you go bankrupt, your debts are discharged. Your husband or wife or common-law spouse is NOT responsible for your debts.
Many people believe that because you are married, your spouse is automatically responsible for your debts. This is not true. Often collection agents, when they are trying to collect from you, tell you that if you dont pay they will get the money from your spouse. This is a collection agency scare tactic they can only go after you for your debts.
The only exception is if your spouse has co-signed or guaranteed your debt. For example, if you took out a loan and your spouse co-signed for it, it is also legally their loan. If you both have a credit card on the same account, the credit card debt legally belongs to both of you.
Remember, your spouse is liable for the debt, not because they are your spouse, but because they have signed for the debt.
There may be an indirect impact on your spouse in the future if you try to obtain financing jointly As you rebuild your credit, you might not be eligible to co-sign a loan or obtain credit. Or, you may be subject to higher interest rates. This may affect your spouse if you jointly wish to apply for credit in your future.
Why Do I Get Phone Calls And Letters From Collection Agencies
Sometimes collection agencies will pursue both spouses even though only one spouse owes debt. If you feel that the calls and letters asking for payment are only meant for your spouse but are still addressed to you, there are a couple of steps you can take to minimize the annoyance.
First, you should request proof of responsibility for those debts from the debt collectors bombarding you with collection demands. Assuming that the debt is solely to your spouses name, you can ask the collectors to stop.
If your spouse has already filed for bankruptcy, he or she can ask the bankruptcy court for an automatic stay to halt all collection activity.
If after your spouse has received your automatic stay and the creditor is still contacting or harassing your spouse about the debt, they should notify the creditor that they have filed bankruptcy and all communications should be stopped. A bankruptcy lawyer can also assist you or your spouse in contacting the creditor to have them stop the calls or communication.
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Will The Bankruptcy Affect Jointly
Another important consideration in deciding whether to file bankruptcy alone or jointly is the amount of debt in your spouses name. It is not the case that simply because you are married, you are liable for your spouses debts. You and your spouse are equally responsible for debts that are in both your names.
Any debts you owe in your own name are your own responsibility. Debts your spouse owes in their name alone are their responsibility. So, credit cards opened by your spouse before you were married contribute to your spouses debt, not yours. A mortgage you acquired jointly after you were married is debt that belongs to both of you.
If you and your spouse are mainly burdened by debts held jointly, filing together makes the most sense. This way, you both can eliminate the debt and gain a financial fresh start. If you file alone, your spouse could be pursued for these jointly-held debts.