When a married person is considering filing bankruptcy alone, a common concern is how the bankruptcy filing will affect their spouse. The good news is, when one spouse files bankruptcy, it generally does not have too much of an effect on a non-filing spouse. However, there are a few things that both spouses should be aware of.
The bankruptcy laws require that “household income” be used in determining whether a person qualifies for a Chapter 7 bankruptcy or how much they have to pay each month in a Chapter 13 bankruptcy. This means that the Court will not only look at the income of the spouse who is filing the bankruptcy, but they will also examine the income of the spouse who is not filing. Although the non-filing spouse’s job will not be affected by the filing spouse’s bankruptcy, the non-filing spouse will be required to submit paystubs and other proof of income during the preparation of the bankruptcy.
The bankruptcy laws also provide a place for the non-filing spouse’s individual debts to be listed as a monthly expense in the household. In other words, let’s say you are married and want to file bankruptcy on $30,000 of credit card debt that is just in your name, but your spouse has $2,000 of credit card debt just in his or her name and does not want to file bankruptcy. Then, let’s say your spouse’s credit card payment each month is $50. You will want to list that $50 monthly payment on your bankruptcy petition so that your monthly household budget is accurate.
The credit score of your non-filing spouse should not be affected by your bankruptcy filing. However, in some instances the credit reporting agencies make mistakes. It is important for the non-filing spouse to check their credit report regularly to find out about any errors (this is a good rule for everyone to follow!). If there is an error on the credit report, then each credit reporting agency should be contacted so that the error can be corrected as soon as possible. The odds of an error increase by a small amount if you are joint on any loans with the non-filing spouse. However, a bankruptcy should not show up on the credit report of someone who has not filed. Be sure to keep an eye on the credit report just in case!
Luckily, the law does allow for one spouse to file bankruptcy without the other – but if you and your spouse both owe debts, you should speak with a bankruptcy attorney about the best options for you and your spouse. If your spouse does not file bankruptcy and finds that your bankruptcy has affected him or her negatively, contact your bankruptcy attorney.