When One Spouse Files for Bankruptcy

When one spouse files for bankruptcy, can it be done without involving the other spouse? The answer is yes and no. If you are are married, you can file for Chapter 7 or Chapter 13 bankruptcy but your spouse's financial information is likely to be deemed relevant by the courts simply because they are your spouse and you share in a marital economy. Your spouse will have to share with the courts their:

Income
Monthly expenses
Assets

My spouse and I have joint debt

Review your all of your debt. Include those items that are only in your name, those that are joint and only in your spouse's name. Be careful about credit cards; if only you signed the application but you gave your spouse's social security number to the credit card company when you added him or her as an "authorized user" you may have inadvertently made them as responsible for that debt as you are. A bankruptcy attorney can help you figure this out.

If you realize that most of your debt is joint debt, and depending on the laws in the state where you live, it may not make sense for one spouse to declare bankruptcy because joint debt can simply be transferred as the full responsibility of your spouse. Talk to a bankruptcy attorney about whether or not you would do better to consider filing joint bankruptcy if there is no way you can budget your income to pay your debt off without bankruptcy in about five years.

Think before you act: fraud alert!

Don't try to keep assets out of the bankruptcy by transferring ownership to your spouse or other relatives before filing bankruptcy. In fact, if an asset transfer occurs within a year prior to filing bankruptcy you could be in danger of having committed bankruptcy fraud and the trustee overseeing your bankruptcy can have the property seized in order to liquidate it and discharge your debts.

Bankruptcy is not an easy last minute tool to erase your debts. It is a serious financial transaction intended to repay as much of your debt as possible and that will have an impact on your credit and your life for years to come.

Other ways bankruptcy can affect your spouse

Bankruptcy can jeopardize your current job if you work in sensitive areas of financial services, or if you are active duty military. A bankruptcy will stay on your credit report for up to ten years, impacting your future ability to borrow money for things like cars and a home.

Getting Legal Help

In today's difficult economy, bankruptcy may have lost some of its social stigma but its negative consequences are extremely serious and long term. Don't do anything until you have consulted with an experienced bankruptcy attorney who can explain local laws, the process and your options. Make sure all of your questions are answered and that you have considered the impact a bankruptcy will have on your own life and that of your spouse.

Think Bankruptcy Might Be for You?