Marriage is union between two people. This often means that the couple shares a financial situation. However, there are occasions where one spouse may rack up an insurmountable debt and wishes to file bankruptcy to discharge that debt. The other spouse may not be as eager to join in the discharge, or may not feel that he or she should be held responsible for the financial situation of another person.
Let’s look at what’s involved:
Can I file a bankruptcy without my spouse?
The simple answer is as we said, “Yes.” It is up to you to decide if you want to file the bankruptcy together or by yourself. Depending on your circumstances, it may be beneficial for you to file bankruptcy together. Review the following questions to analyze what which is your best option.
Is it best to file bankruptcy without my spouse?
When considering whether to file by yourself or with your spouse, you need to consider the type of debt you have, who the debt belongs to, and if you will be able to accomplish your future goals by filing bankruptcy alone.
- Were your debts obtained before your marriage or after your marriage?
If you have medical debt, you first need to think through when you acquired your debt – was it before or after your marriage? If your medical debt is from before the marriage, the person who received medical services is the only person who owes the creditor. If the medical debt is for a visit or procedure that occurred during your marriage, both you and your spouse are responsible for paying that debt according to the law.
- Are your debts in both of your names or just in your name?
If your debt is mostly from credit cards or personal loans, you need to know whether the debt is just in your name or is also in your spouse’s name. If only one of you has credit card debt in your name, your spouse is not legally required to pay that debt and you won’t need to worry about them filing a bankruptcy.
- Is there enough relief from your debt with only one spouse filing?
Now that you know who is responsible for the debts, you can determine whether it is best for you to file by yourself or together. If most of the debt is in one spouse’s name, it might be helpful for the spouse with the debt to file alone. You will get the benefit of the bankruptcy, but you can also protect your partner’s credit score. The more debt that is shared between you and your spouse, the less advantageous it is to file bankruptcy alone.
If your debt was accumulated prior to your marriage and is all in your name, it is probably best to file bankruptcy alone. However, if the debt occurred after your marriage and/or is in both your names, you need to file bankruptcy together.
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.
A careful review of the debt structure is in order. For example, jointly owned property may be affected if only one spouse files. In most cases, both the husband and wife have the same debts or have cosigned the same loan agreements, or medical debt. If only one spouse files for bankruptcy where this is the case, the creditors can continue to demand payment from the spouse who did not file.
They type of bankruptcy a person files does not necessarily alter the responsibility of the underlying debt. If one spouse co-signed a loan for the spouse who is declaring a straight Chapter 7 bankruptcy, that spouse may still be held responsible. If the spouse declaring bankruptcy files a Chapter 13 bankruptcy, the legal and collections actions against the non-filing spouse will be suspended for the duration of the proceedings. However, the creditors will have to option to pursue the amount from the co-signer once the bankruptcy proceedings have ended. Your attorney will have the most accurate information about your particular situation.
In almost all cases, if one spouse decides to file for bankruptcy on a medical debt or a debt co-signed by both spouses, the responsibility lays with both. This may continue to be true even after a divorce, if one spouse co-signed a loan with the other or received medical services during marriage, despite the language in the divorce decree.
The simple answer is, “Yes.” It’s always up to you to decide if filing bankruptcy alone or together is your best option. The law allows you to file either jointly or separately.
When you think about filing, you wonder if you will have the credit you need afterwards. Perhaps if only one of you file bankruptcy, it will be easier? Although it seems like it might be your best solution to keep one “good” credit score in the family, it will depend on your circumstances whether you should file alone or together.
This is a complicated process, and your situation may be unique. At Steffens Law Office, our skilled team is prepared to help you make the difficult decisions and determine which option is best. Call our office today at (308) 872-8327 for help walking through filing a bankruptcy. We want you to be able to make big future financial goals without the stress of paying off the debt!