Most married couples are concerned about the effect bankruptcy may have on their non-filing spouse. You may own a home together where both names are on the mortgage, or your spouse may be the co-signer on some of your debts you hope to discharge through bankruptcy. You may be a newlywed or a veteran in the married field, and would rather not have your spouse be affected by your financial decision to seek debt relief. The most common question asked by married couples is whether one spouse can file alone, or must they file a joint petition?
Your Spouse Does Not Have To File Bankruptcy
Under the current bankruptcy law, married couples have the option of petitioning for debt relief by filing a joint bankruptcy petition. Although it may make life easier as most couples share debts and hold property in both names, you are not required to file with your spouse. You can file individually and have the debts that are solely on your name granted a discharge. If you decide to file together, you can save money on the legal fees and the court filing fee. The filing fee for a Chapter 7 is $335, and the fee for a Chapter 13 is $310. The fee remains the same whether it is one person who is filing or two. A law firm will also typically discount their legal fees in the case of a joint petition.
Your Spouse’s Credit Report Should Not Be Affected
The first thing most people associate with filing for bankruptcy is a negative credit rating. I have clients ask me each and every time on whether they will ever be able to qualify for a mortgage or a can loan again. Of course, my answer is yes. I hear plenty of success stories from clients who are able to receive loans two months after their discharge. Even after relaying such stories, people are understandably skeptical. If their credit is ruined, they want to make sure that their spouse’s is not. They need their spouse to be able to get a loan in case they cannot. If you or your spouse has filed for debt relief, the non-filing spouse’s credit should not be affected because they did not file for bankruptcy. The non-filing spouse’s credit may be negatively affected by the non-payment of co-owned debts, which is true notwithstanding of whether or not a bankruptcy is filed. If the debts are only in the filing spouse’s name, then that creditor could care less if you are married or not since they cannot collect from your other half. A situation where your spouse’s credit may be affected by non-payment is when then there joint credit cards or loans. If most of your debts are held together, then it is advisable to file jointly.
Your Non-Filing Spouse’s Income Will Be Included
Not everyone can file a Chapter 7 or a Chapter 13 bankruptcy. There are certain criteria an individual must meet before they qualify. In order to qualify for a Chapter 7, you must pass the “means test,” which basically means that your family income must be equal to or less than the median income in your state for the same household size. The bankruptcy court considers all income earned by either spouse as belonging to each other. To put it in other words, your income is your spouse’s income and vice versa. If it is the case that you annually make $40,000, and your spouse makes $30,000, you may not qualify for a Chapter 7, depending on the amounts for your state. The non-filing spouse’s earnings are also used in determining the “disposable income” in a Chapter 13 (or Chapter 11), and the household budget in all chapters. This rule applies to all states.
Furthermore, the bankruptcy estate, whether or not you are filing solo, includes all assets that were attained during the marriage. The non-filing spouse’s property may be at risk of being seized and sold by the trustee depending on the value of the item, the available state or federal exemptions, and the type of bankruptcy chapter being filed. Assets that were acquired before the marriage by the non-filing spouse are not included in your petition.
Contact a Bankruptcy Specialist for Further Information
Not one bankruptcy case is the same. The answer to the posed question on whether your spouse will be affected by your bankruptcy filing is a tricky one. Including your spouse’s assets into your filing may not qualify you for bankruptcy to begin with, so there will not any negative effects to consider. If you are able to file, the effect on your spouse is typically non-existent as their credit rating is not impacted by your filing. With all things said, every situation is unique and should be thoroughly explored with a bankruptcy lawyer prior to filing.
Mishiyeva Law- Bankruptcy Lawyer NYC 80 Wall Street New York, NY 10005 (646) 736-6328 kmbankruptcylawyerny.com