Posted on: 27 January 2021
Do you plan to file bankruptcy even though your spouse doesn't? Although many married couples and partners do file together, others may make two separate choices about bankruptcy. However, even if you do plan to forge ahead with bankruptcy on your own, it's important to include your spouse in the process. Why? Here are three important reasons.
1. Joint Assets May Be at Risk
If you declare bankruptcy, only your assets are at risk of seizure or used to make a repayment plan. However, couples with joint finances may find that the definition of "individual assets" can be complicated.
The treatment of joint assets in a one-party bankruptcy varies by state. If your state follows standard community property rules, assets you both share — including a house, car, bank accounts, and personal belongings — may become part of one party's bankruptcy claim. Other states only consider the value of half of shared property.
Because large-scale joint assets, like your home, could be at risk, both partners should understand matters. This might be facilitated by including your spouse in meetings with your law firm or with the trustee.
2. Shared Debts Make Things Complex
Technically, the bankruptcy of one spouse results in the discharge of or repayment plans only for debts in their name. Debts solely in their spouse's name aren't involved.
However, joint debts can become tricky because only one debtor's responsibility is discharged. The remaining spouse would likely be left on the hook for the entire debt since their responsibility isn't affected. This is one main reason why both spouses sometimes end up declaring bankruptcy anyway.
3. You Should Plan for the Future
The decision to declare bankruptcy is up to each individual, of course. But a couple is smart to plan for their post-bankruptcy future together so they can craft the best strategies for success.
For instance, if one spouse will suffer credit score problems for a period after bankruptcy, they may need to rely on the other partner's good credit if they plan to finance anything in the near future. And decisions about which loans to reaffirm — such as a car or the house — or what to exempt are best made by all the relevant stakeholders.
Where to Learn More
Even though bankruptcy is a very personal matter, keeping your partner informed and involved in your case is important. You will be better able to make the best decisions for your finances and your relationship. Learn more about individual and joint bankruptcy options for married couples by meeting with a lawyer from a bankruptcy law firm in your state today.Share