How will bankruptcy affect your spouse

bankruptcy when married
How will filing bankruptcy affect your spouse?

This is a great question, and an important one to consider whether you are filing bankruptcy individually or jointly with your spouse.  Also depends on whether you are filing Chapter 7 bankruptcy or Chapter 13 bankruptcy.

One of the most common questions a Utah bankruptcy attorney receives is: “How will filing bankruptcy affect your spouse?” The issue comes up most frequently when only one spouse is planning to file bankruptcy. Many people have the mistaken impression that because they are married, their spouse is automatically responsible for their debts. This is not the case. Both spouses are on the hook only if the debt was incurred in the name of both partners. For example, a credit card account started by your husband while he was a bachelor does not become your legal responsibility just because you’ve tied the knot. On the other hand, a joint credit card account or mortgage you’ve both signed for is a joint debt, meaning both you and your spouse are on the hook and the bankruptcy of just one of you will leave the other holding the bag — or the debt, as it were.

If a husband files bankruptcy without his wife, only the husband’s debts are discharged.  This is the same in a Chapter 7 or a Chapter 13 case.  If the debts are held jointly, the non-filing wife will still owe even after one spouse has filed bankruptcy. The bankruptcy filing will appear on the husband’s credit report, but should not appear on the wife’s. If a non-filing spouse receives an adverse rating on their credit score as a result of their spouse’s bankruptcy, the matter should be addressed immediately with the credit reporting agencies. A non-filing spouse should not have their credit damaged as a result of their husband or wife filing for bankruptcy.  If you are in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), you may be liable for those debts even though your name is not on them. Make sure to contact an attorney in your area if you live in one of these states. In that case, if he files for bankruptcy and you don’t, the creditors will just try to collect from you instead of from him. Even if you don’t live in a community property state, you may still be liable for some of the debts. Some of them may have been for your expenses. For the expenses of fixing your house, the contractors may have placed liens on it. In addition, the courts have some discretion deciding which debts to discharge (get rid of), and laws vary by state. It can be very complex. Sources: National Bankruptcy

I suggest if this is an issue you are wondering about that you bring your spouse into my office for a FREE Consultation so we can discuss your options and make sure each of you understand how will filing bankruptcy affect your spouse.  Click HERE to set up a consultation today. #utahbkguy

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