How can bankruptcy affect your spouse
Well, this question is hypothetical in that, the effect of bankruptcy on your partner depends on many things. For example, if you were retrenched, if you had an accident or illness that rendered you incapable of paying your bills, then there is no reason why your spouse should not understand. If you alone are in debt, it is only fair that you alone file for bankruptcy. If you both owe jointly, then both of you will be conjoined in the bankruptcy filing.
On the other hand, in the case of joint debts, it is obvious that you and your spouse will be held responsible even if only one spouse fails to pay their part. Thus, both of you will have to agree to claim bankruptcy jointly. If you failed to make payments on your part due to habits like drinking, your spouse will be badly affected by the bankruptcy and could even file for divorce after the bankruptcy proceedings are over.
The impact is felt for as long as the bankruptcy proceedings carry on in the jointly held assets and liabilities and carries on till the bankruptcy is discharged. For those who have never been through such a situation before, it will be quite messy and if unprepared, it may strain your marriage for life. It’s unfortunate that the spouse who does not file for bankruptcy does not get any relief from their debts unlike their partner. At the same time, they are categorized as non-participants on assets and liabilities jointly held. According to bankruptcy law, there must be absolute full disclosure of assets held jointly between partners.
Is it necessary to file for bankruptcy with your spouse?
Legal practitioner’s advice that if one partner is so much buried in debt, then they should file for bankruptcy individually. The jointly held debts will remain with the other partner who has not filed for bankruptcy. The application of the law when it comes to jointly held debts in marriages differs in some states.
What is the impact on the non-applicant spouse?
First, the debts of the non-applicant spouse will not be catered for so they ae left indebted to their creditors. As for the spouse that files for bankruptcy, they are relieved from taking the personal responsibility of clearing the remaining debt. This remaining debt does not just vanish away. In cases where the ownership on the debt is joint, creditors are left with no choice but to begin hunting for their money from the other spouse. This will apply to debt accumulated on credit cards and mortgages among others. The signers are individually held responsible for all outstanding periodical payments and balances, taxes on property, as well as other liens on property.
The assets which are jointly held by both partners have to be listed on a trustee list. The manner in which this asset is handled will depend on what it is. Factors considered are whether it has an exemption value as well as the percentage of ownership between the two spouses. Trustees are capable of selling these assets if enough value still exists even after paying off the non-filing spouse as well as exemptions that exist.
If your spouse files for bankruptcy individually, then it is important that you come up with a comprehensive proof, which outlines your personal share in the ownership of assets or money in your jointly held account.
With the help of a good lawyer, this can be achieved. Your bankruptcy attorney and trustee will provide you with essential information on how to handle your assets. As a partner who has not filed for bankruptcy, you will be within your rights to be accorded some exemptions as well as your portion of the amount of money, which is jointly held in your accounts. This proof will protect some of your assets.
What are some of the exemptions?
Bankruptcy experienced by one spouse does not affect the other unless in the case that there is;
- A contentious area in the application of the law
- When applying for a loan jointly, the bankruptcy of one spouse affects the credit worthiness of the other spouse.
- When there is property that is jointly held there are some pertinent considerations that must be observed in regard to preventing any infringement on the right of the financially sound spouse.
Is your credit rating affected?
Several people who have experienced bankruptcy in their marriage claim that it at times get noted on the credit report of the spouse who has not filed for it. However, this will not impact their credit score. When one spouse files for bankruptcy, the others spouses financial position remains solid. Collection agencies might contact both partners indiscriminately despite one spouse owing the debt, so brace yourselves for occasional letters and phone calls.
Does bankruptcy by one spouse affect joint deals?
According to Chapter 7 bankruptcy, whenever the debts of one spouse are eliminated, creditors are at liberty to go after the other partner. In Chapter 13, the creditors will ignore the financially sound spouse, provided that the payment plans are being adhered to on a timely fashion.
My name is Craig R. Chlarson. Whether you are seeking to eliminate your debt, typically through a chapter 7 filing, or whether you are seeking to reorganize your debt, typically through a chapter 13 filing, or even if you have basic bankruptcy questions, call me today. I can help you.
To schedule an appointment, call (435) 901-3449
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