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How To File Bankruptcy While Married

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If you are married and are considering filing for bankruptcy on your own the form you choose is important. You can file for both Chapter 7 and Chapter 13 if you meet the criteria. The one that is best for you depends on a few different things. In both cases, the courts consider both spouses income. In Chapter 7, in which debtors liquidate assets to pay off debts, if both incomes exceed the income level set by law, you may not qualify for this type of bankruptcy.

Alternatively, Chapter 13 may offer debt relief for you or your spouse. In this type of debt relief, a trustee sets up a monthly payment plan to pay down your or your spouses debts. The amount of the payment depends on both spouses incomes.

Will Filing For Chapter 7 Bankruptcy Affect My Spouse

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In a Nutshell

If youâre filing for Chapter 7 bankruptcy and your spouse is not, you may be wondering whether they are going to be affected. The short answer is that if your debts are separate, their credit will not be impacted.

Written byAttorney Eva Bacevice.

If youâre filing for Chapter 7 bankruptcy and your spouse is not, you may be wondering whether they are going to be affected. The short answer is that if your debts are separate, their credit will not be impacted.

Which Debts Are Discharged

Your bankruptcy discharge eliminates your obligation to pay your dischargeable separate debts and joint debts. Your discharge does not affect your spouse’s responsibility toward any joint debts. This means that your spouse is responsible for paying back his or her separate debts and is still on the hook for any joint debts you had together.

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Joint Debts Are Not Completely Discharged

Joint debts are debts that are entered into by both spouses. For example, if you and your spouse have your names on the loan for a luxury vehicle, this debt will not be eliminated when one spouse files for bankruptcy individually. Instead, the portion of debt owed by the petitioner will be discharged, and the other spouse will still owe the remaining debt.

If the name of the petitioner is the only name on a debt that would be discharged in bankruptcy, creditors cannot pursue the petitioners spouse to recover compensation.

Go To Court To File Your Bankruptcy Forms

Filing Bankruptcy While Married

Once you enter the doors of your local courthouse, you will be greeted by security guards, who will ask you to pass through a metal detector. Once you pass security, you will go to the clerkâs office and tell the clerk that youâre there to file for bankruptcy. They will take your bankruptcy forms and your filing fee .

Do not submit your bank statements or tax returns to the court. These documents go to the trustee after the case is filed. Check out Step 7 below for more info on that.

While you wait, the clerk will process your case by scanning your forms and uploading them to the courtâs online filing system. This usually takes no more than 15 minutes.

Once done, the clerk will call you back to the front desk and give you:

  • Your bankruptcy case number

  • The name of your bankruptcy trustee

  • The date, time, and location of your meeting with your trustee

At this point, your case has been filed! Congrats! The automatic stay now protects you from all debt collectors. But youâre not home yet – there are other steps you need to complete to get a fresh start under Chapter 7 of the Bankruptcy Code!

Also Check: How Do I File For Bankruptcy In Texas

The Disadvantages Of One Spouse Filing For Bankruptcy:

  • The non filing spouse will still be responsible for paying joint, marital debt.
  • Dual filing fees are less costly than if each spouse were to file separate bankruptcies .

We will take the time to fully evaluate your unique situation and determine the impacts of dual and individual filing, presenting you with straightforward analysis of the benefits and consequences of each.

Dont File For Divorce And Bankruptcy At The Same Time

For the sake of simplicity, the two legal matters shouldnt overlap with each other. Commonly, people choose to file bankruptcy before going through with a divorce and there are several logical reasons for that. Once bankruptcy is filed, for both chapter 7 and chapter 13, an automatic stay is put into place. The automatic stay halts creditors from contacting you and puts a freeze on your assets and property this is so the bankruptcy court can begin sorting out what debts you owe and what assets you have that can help compensate for some of it. This hold is effective throughout the bankruptcy process.

Now lets say, you filed for bankruptcy and then immediately filed for divorce, causing the two to overlap. Since a large part of the divorce process is splitting up assets , the automatic stay would make it virtually impossible for the family court to access and divide the assets, since they are put into a hold. Because of this, the divorce could be dragged out longer than necessary and become more emotionally stressful for you or your loved ones.

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Navigating Your Bankruptcy Case

Bankruptcy is an unusual area of law because it’s essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can’t skip a step.

The forms and resources below will help you find more information. Also, you can use this list of Chapter 7 and 13 bankruptcy forms to see where this topic falls. And this handy bankruptcy document checklist will help you gather the things you’ll need to complete the petition.

More Bankruptcy Information

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    What If We Want To Apply For Joint Loans Or Credit Accounts Together In The Future

    Do I Have to File Bankruptcy With My Spouse

    You and your spouse will still be able to apply for joint loans or credit accounts in the future. For a while, your bankruptcy filing may impact your ability to get a joint loan with good terms. But, most people with poor credit who file for bankruptcy see their when compared to people with poor credit who remain in debt. So, as you rebuild your credit score, you’re ability to get favorable terms on new loans will increase as well.

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    Mail Documents To Your Trustee

    The Chapter 7 trustee is an official appointed by the court to oversee your case and liquidate, or sell, nonexempt property for the benefit of your creditors. Not all types of bankruptcy require the involvement of a bankruptcy trustee, but both Chapter 7 and Chapter 13 cases have one.

    Pay attention to mail you receive from the trustee after filing your case. The trustee will send you a letter asking you to mail them certain financial documents, like tax returns, pay stubs, and bank statements. If you donât send the trustee the requested documents following the instructions provided in their letter, you may not get a discharge of your debts.

    Filing As An Individual

    When you, as an individual, are filing for bankruptcy, that state of personal insolvency affects you and you alone. This means that it will discharge only your personal debts such as credit card debt, student loans, and store cards.

    Now, when you file for bankruptcy as an individual, youre released after 3 years and one day from most of your debts. Heres the process for filing as an individual:

    • Provide the full details of your debts, your income and your assets to a trustee appointed by AFSA
    • This trustee notifies your creditors that youre bankrupt, which will prevent most creditors from contacting you about your debt.
    • Its under the trustees authority to sell certain assets that can help pay off your debts .
    • Following this, and depending on your income, you may be required to make compulsory payments

    The good news is that, when you file as an individual, youre essentially taking the responsibility on yourself. Your bankruptcy declaration will not affect your spouses , personal assets, debts, or income.

    However, youre both still married and so the non-filing spouse will have to provide full financial details, including their income, their personal assets, joint liabilities and joint assets.

    Why? Because these financial amounts provide a fuller financial picture of your marriage. And theyll be used in making a determination as to the amount of compulsory repayments.

    Also Check: What Does A Bankruptcy Discharge Letter Look Like

    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

    How Does Bankruptcy Affect Alimony & Maintenance Or Support

    How to File Bankruptcy Separately When Married ...

    Bankruptcy does not discharge outstanding alimony or child support payments in Canada pursuant to section 178 the Bankruptcy & Insolvency Act.

    The spouse owed back support payments can make a claim in the bankruptcy and receive their share of any dividend paid from the estate. Any alimony or support arrears for the 12 months prior to the date of bankruptcy are considered a preferred claim and are paid out of the proceeds of the bankrupt estate before any other unsecured claims. The balance left unpaid is still owed by the paying spouse.

    Unpaid debts due to equalizaton payments under the terms of a divorce or separation agreement are treated like any other unsecured debt and are eliminated by filing bankruptcy.

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    Will My Spouse Have To Pay Our Joint Debts During Chapter 13 Bankruptcy

    Probably not. The Chapter 13 automatic stay stops creditors from coming after your codebtors, including a spouse. If you won’t pay off the joint debt in your repayment plan, a creditor might ask the court to lift the codebtor stay. If that doesn’t happen, your spouse should plan to pay any balance remaining after your Chapter 13.

    How Does Filing Bankrcupty Affect My Spouse

    Does my bankruptcy affect my spouse?

    A married person in overwhelming debt, and who has to file bankruptcy, startswondering if bankruptcy should be filed with or without the spouse. Theyworry about how their decision impacts their family, and are especially worriedabout its implications on his or her spouse and their credit report.Some even worry about their spouse losing their job or that both partners areobligated to file for bankruptcy. They usually end up having these questionsrunning in their head, and look for answers to them:

    Will filing for bankruptcy affect my spouse’s credit?

    Answer: Mostly like NO. This is the biggest concern of individuals filing for bankruptcy. Howevereveryone, married and single, have separate credit bureau files connected totheir social security number. So as long as the spouse isn’t a co-debtor, or legally liable for the same debt, filing for bankruptcy to eliminate debt won’t affect the spouse’s credit score.But if the couple has joint debts and if the non-filing spouse is a co-debtor thenthey have more to worry about besides a negative report on their credit score.This is because when a spouse files for a Chapter 7 bankruptcy to discharge thejoint debt, there’s a chance of it appearing on the other spouse’s credit report. So the creditor can take immediate action against the non-filing spouse. Besides, creditors will be notified about the spouse’s bankruptcy status and may bother the non-filing spouse to collect joint debts.

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    Filing For Bankruptcy Before Your Divorce: Pros And Cons

    There are several ways that filing for bankruptcy before your divorce can benefit you. If you file for bankruptcy first, you and your spouse will only have to pay one filing fee and can share the legal fees of your bankruptcy attorney. Filing for bankruptcy first can also make the property division portion of your divorce case simpler. In a normal divorce, the court will divide both the assets and the debts. If you and your spouse secure a discharge of your unsecured debts, neither one of you will have to pay them after you receive the discharge. This means that the court will not need to divide them.

    It is also important to note that if a judge orders your spouse to pay a debt that you share, the courts order will not impact the creditor. Since the creditor is not a party to your divorce, it can go after either you or your spouse to collect payment. If you do not obtain a discharge of a debt through bankruptcy, the creditor can seek to collect what is owed regardless of the family courts orders. If it is discharged in a bankruptcy that you and your spouse file before you file for divorce, the creditor may not engage in any further collection activities for that debt against either you or your spouse.

    Filing For Bankruptcy During Divorce

    Bankruptcy & Your Spouse: What to do so your bankruptcy won’t affect your spouse!

    Whether you file bankruptcy before or after your divorce is finalized affects whether your creditors will be entitled to any assets that may be part of our divorce agreement.

    If you file bankruptcy before your divorce is final, your assets transfer to your bankruptcy estate and are no longer available for distribution in a divorce.

    Alternately, if you finalize your divorce before bankruptcy and assets are transferred to an ex-spouse as part of a Family Court Order or legal separation agreement before you file for bankruptcy then these assets are no longer available for your creditors in the bankruptcy.

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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.

    How Will The Bankruptcy Affect Both Of Your Credit Scores

    Filing bankruptcy jointly with your spouse makes sense if you are both burdened by debt in both your names. If your spouse files but you dont, your jointly-held debt will become your responsibility.

    However, if you file jointly, both of your credit scores will be adversely affected. This will hinder your ability to buy a home, car, or start a business for several years following discharge.

    If you and your spouse plan on doing any of these things, you may need to consider filing alone. It may be better for the more indebted spouse to file so the other spouse retains a good credit score. The spouse who doesnt file can even help the other improve their credit score by co-signing on new debts and credit cards.

    Thus, its important for both spouses to review their credit reports when considering whether to file bankruptcy alone or jointly. Its also vital that the spouse who does not file reviews their credit report regularly. They will need to ensure that the other spouses bankruptcy does not show up on it.

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    What Is Community Property

    Nebraska is not a community property state its a common law property state. So whats the difference?

    In community property states like California and Texas, most if not all of the property acquired during your marriage is officially owned by both spouses, no matter whose name is on the title. Therefore, all that property can become part of your bankruptcy, which can hurt your spouse financially if you dont have enough bankruptcy exemptions to cover all your joint assets. In such a case, filing bankruptcy as a couple is preferable to individually filing bankruptcy while married, and this is what almost always happens.

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