If you decide to file for bankruptcy, but your spouse does not, you might be unsure as to what obligations your spouse has in the bankruptcy process. If you file for bankruptcy alone, will your spouse’s credit be affected? Will his or her debts be erased as well? These are common questions that spouses who do not file for bankruptcy together have. Considering the consequences to your spouse might help you decide what kind of bankruptcy to file for.
If you file for individual bankruptcy, it can have both positive and negative impacts on your spouse. On the one hand, this can be good because your spouse won’t be dragged through the bankruptcy process along with you. In addition, if you have your own credit file for your credit report (which every person should), bankruptcy filed by one spouse will not show up on the file of the other spouse, so long as you have no joint debts. If this is not the case, the spouse that did not file for bankruptcy won’t be burdened with a tarnished credit score. However, if both spouses apply for a joint loan in the future, and one spouse has a history of bankruptcy, this can affect the chances of getting the loan.
Filing for bankruptcy alone can certainly have a negative impact on the opposite spouse. If your spouse also has debt, he or she will not be entitled to your automatic stay or bankruptcy discharge. Any joint debts that you and your spouse have will not disappear for your spouse. Bankruptcy can protect the filer from creditor harassment, but this might lead to your spouse being harassed even more for payments, as he or she will still be legally responsible for making the payments. This is the case for a joint tax return. Likewise, if you own joint property, this property can be included in the bankruptcy estate. This means that your property could potentially go to creditors as collateral. For these reasons, bankruptcy filed by one spouse can negatively impact the other spouse.
The impact that bankruptcy filed by one spouse will have on the other will vary depending on your personal situation. If you have little to no joint debt and no joint property, the impact of the bankruptcy on the spouse that did not file for bankruptcy will be minimal and potentially positive. However, unless you file for joint bankruptcy, one spouse will not be protected by the benefits of bankruptcy, such as an automatic stay or a discharge. This leaves the other spouse vulnerable to further debt and continued payments. For this reason, you should consider your personal situation before deciding on filing for joint bankruptcy, individual bankruptcy, or no bankruptcy at all. These options can be discussed with an experienced bankruptcy attorney, such as myself. I offer free consultations in which I will go over your case and advise you on the right decision for you. If you are interested in contacting me with questions, you can click here.