This is one of the most common questions a bankruptcy attorney is asked. Just because you are married doesn’t mean you spouse is automatically responsible for your debts. In fact, spouses are usually only responsible for debts incurred in the name of both partners. If you are married, but filing for an individual bankruptcy, the consequences for your spouse may vary according to multiple factors. Below, we address the big ones:
Factor #1: How the Debts Were Acquired
- Individually: If one spouse files bankruptcy without the other, only the filing spouse’s debts that were acquired as a single individual are eligible for discharge or a payment plan.
- Jointly: If the debt was acquired together and only one spouse files bankruptcy, the non-filing spouse will still owe on any jointly held debts.
Factor #2: Property Law
- Common Law Property: In a common law property state, any individual assets and interest, as well as jointly held interests in property, will be considered part of your bankruptcy estate. If the non-filing spouse owns property solely on their own, that property will not be considered part of the bankruptcy estate.
- Community Property: In community property states, almost all assets acquired during the marriage are considered to be jointly held by the spouses. This means that most of a married couple’s assets will be considered part of the bankruptcy estate and can be used to satisfy debts- even if only one spouse is filing. In this instance, an individual bankruptcy filing can have a large impact on a non-filing spouse.
Factor #3: Type of Bankruptcy
- Chapter 7: A Chapter 7 bankruptcy is essentially a liquidation of your assets to pay your debts. In this manner, the above information on how the debts are held and the property laws in the filing state will greatly determine if a creditor can go after the other spouse.
- Chapter 13: In a Chapter 13, the debtor works on a plan to re-pay the debt over a period of time. Chapter 13 also offers a “codebtor stay”, which prohibits creditors from coming after your codebtors during the bankruptcy. However, this stay can be lifted if the debtor fails to make payments on time.
In general, one spouse’s bankruptcy should not affect the credit score of the other spouse. However, if the spouses hold joint debt, the fact that one spouse filed for bankruptcy could appear on the other spouse’s credit report, making it potentially more difficult to secure joint financing in the future.
Only the filing spouse can have their debts discharged. An individual bankruptcy does not discharge a spouse’s debts or any jointly held debts.
If you (or your spouse) have considered filing for bankruptcy, consult with an experienced bankruptcy lawyer Phoenix, AZ residents trust. At Kamper & Estrada, PLLC we offer free one-hour consultations to learn about what bankruptcy options might be best for you and your family.