How Will Filing for Bankruptcy Affect My Spouse?

Much like getting a shot or going to the dentist, declaring bankruptcy is something most Americans fear and dread. When it comes to filing — particularly because those who do, generally never have before — a storm of questions swirls in the mind. At the forefront of these questions, one may wonder, “What will happen to my spouse? How will this affect them?”

Does My Spouse Have to File for Bankruptcy With Me?

The most obvious and immediate question that springs to mind is probably, “Does my spouse have to file for bankruptcy, too?” Well, you can breathe easy, because the short answer is no, they don’t have to. It may be more advantageous to you to file separately. Alternately, it may be more advantageous to you to file jointly. It depends on your unique financial situation, and how and where the debt has been incurred. Whether you opt to file for Chapter 7 or Chapter 13 is a major variable that will affect what’s best for your household.

Stressed Couple - How Will Filing for Bankruptcy Affect My Spouse?

Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy

There is a significant difference, when it comes to how your spouse will be affected, between filing for debt under Chapter 7 VS. Chapter 13. Under Chapter 7, filing for bankruptcy will eliminate the debt of the person filing (with some exceptions, such as student loans and income taxes). What it will not do is eliminate the debt, if any is held, of the non-filing spouse. That means that creditor can therefore continue to pursue the non-filing spouse for any payments owed.

Chapter 13, on the other hand, works in a different way. If the bankruptcy plan addresses the debts held by both marriage partners (joint debt), the creditor can not pursue the non-filing spouse during the period of time in which the bankruptcy is in effect. (With Chapter 13, this period is generally in the range of three to five years. Chapter 7 bankruptcies are resolved more quickly, in time frames closer to three to six months.)

Will Bankruptcy Affect Our Credit Scores?

The fundamental question, “How will bankruptcy affect my spouse?” invariably leads to the more specific question, “What about credit scores?”

Bankruptcy filed jointly affects both of your credit scores. Bankruptcy filed individually affects only your credit score. (Keep in mind, however, that if you apply for loans together in the future, your damaged credit score is going to factor into your combined score.)

If both of you have debt, another factor you may want to weigh when deciding whether to file jointly or separately is the fee: typically, a filing fee must be paid. If you file jointly, there will be one fee instead of two; one set of documents instead of two; one hearing instead of two. This saves money, and boosts efficiency.

Our Philadelphia + Bucks County Bankruptcy Lawyers Can Help

Filing for bankruptcy sounds intimidating, but it might be the best financial recovery plan for you and your spouse. To talk more about your options, get in touch with an experienced bankruptcy attorney at Young, Marr & Associates today, and let us help. You can also call us at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania.