Financial hardships may come at some point, and sometimes your only way out is through bankruptcy. Can you file it without your spouse?
Yes, you can file bankruptcy without your spouse if you’re struggling financially and you need debt relief. However, you need to remember that the filing may also have an impact on your spouse, especially if you have joint debts. Several factors come into play in determining if it’s your best option.
For married couples, they can file bankruptcy with or without their spouse.
When to and not to File Bankruptcy Without Your Spouse?
Filing bankruptcy without your spouse makes sense under these circumstances:
- If you don’t share debts with your spouse
- If you and your spouse have separate debts
- If you have a lot of debt but your spouse doesn’t have any
- If your spouse has assets they don’t want to lose
- If your spouse has a good credit record and has not co-signed in any of your debts
- If your spouse recently filed for bankruptcy (must wait 8 years for Chapter 7 bankruptcy and 2 years for Chapter 13 bankruptcy) and not yet eligible for a discharge
- If you want your spouse to still be able to file for bankruptcy in the future
It’s not recommended to file bankruptcy without your spouse under these situations:
- You and your spouse have joint debts. Filing bankruptcy separately will still negatively affect your spouse’s credit score. The bankruptcy discharge will only apply to you but it won’t protect your spouse from debt collectors.
- You don’t want to include your spouse’s assets in the bankruptcy estate. Whether you file bankruptcy with or without your spouse, all your marital assets will be included in the bankruptcy estate if you live in a community state.
What Happens to the Automatic Stay Order if You File Bankruptcy Without Your Spouse?
The court will issue an automatic stay order when you file bankruptcy. It prevents lenders from pursuing their debt collection efforts. But if you do this without your spouse, the automatic stay order will only apply to you. It won’t protect your spouse. But if you and your spouse have joint debts, filing a Chapter 13 bankruptcy will protect your spouse because the court can order a co-debtor stay, which prevents lenders from collecting debt from co-debtors. If you are living in a community property state, the automatic stay is applied to you and your spouse’s community property (e.g. wages, furniture, a home purchased during the marriage). Therefore, lenders can’t garnish their wages or seize their assets while the automatic stay is still in place.
Will a Bankruptcy Discharge Protect Your Non-Filing Spouse?
When you file for Chapter 7 bankruptcy, your primary goal is to obtain a bankruptcy discharge, which means you’re no longer obliged to repay your debts. If you and your spouse have joint debts, the bankruptcy discharge only applies to you. Your non-filing spouse isn’t included, which means they’re still liable for the debt.
If you’re living in a community property state, your non-filing spouse’s community property is protected but not their separate assets, and collectors may redirect their collection efforts to your spouse.
How Does Living in a Community Property State Affect my Bankruptcy Filing Without my Spouse?
If you live in a community property state, all assets acquired during the marriage belong to you and your spouse, and it is considered community property. Meanwhile, you own separately all the property that you have had before the marriage and any asset that you have inherited during the marriage.
You need to take these into account so you know which of your assets will be part of the bankruptcy estate, used to pay your debt, discharged, and who will be protected by the bankruptcy discharge. There are only a few states that recognize community property including Idaho, Texas, and Wisconsin.
If you file for bankruptcy without your spouse, all community property will be part of the bankruptcy estate. All assets that are not exempt can be sold by the bankruptcy trustee to pay off your debt.
You should also take note that marrying someone doesn’t make you liable for your spouse’s debt, which was incurred before marriage. For example, if you have medical and credit card debts before marriage, you’re solely responsible for your debt. So, if you file for bankruptcy without your spouse, the bankruptcy discharge only applies to your debt only. Creditors may still collect from your spouse for their personal debt.
Will Your Spouse be Responsible for Your Debt if You File for Bankruptcy Separately?
If you and your spouse have joint debt, filing an individual bankruptcy will not protect your spouse. You may no longer be liable to pay off the joint debt but since your spouse didn’t file bankruptcy, lenders may pursue them instead. On the other hand, if the debt is only under your name and you filed for bankruptcy, lenders cannot pursue your spouse to recoup the money you owe.
Will Your Bankruptcy Filing Affect Your Spouse’s Property?
If you file for individual bankruptcy, your spouse’s personal property won’t be affected. However, if you live in a community property state, all assets acquired during your marriage are considered community property. It means they can be used to pay off the amount you owe if you incurred the debt during your marriage.
But if you don’t live in a community property state, your spouse’s separate property can’t be used to pay off the debt that’s under your name only. You should also familiarize yourself with the bankruptcy laws and how it affects your tax return. For example, you and your spouse filed a joint federal tax return. If you go bankrupt, your non-filing spouse will still get to keep 50% of the total tax refund.
Will your spouse be responsible for paying your joint debt if you filed for bankruptcy? As previously mentioned, your non-filing spouse won’t be protected from your lender’s collection efforts for joint debts. Collectors may not be able to collect discharge debts from you but they can do so on your spouse.
Will Your Spouse’s Credit Score be Affected if You File for Individual Bankruptcy?
If the debt is only under your name and you filed for bankruptcy, your spouse’s credit report will not be affected. Even if that’s the case, you should still ask your spouse to request a copy of their credit report after you file for bankruptcy to make sure that no erroneous negative marks are added to her credit report.
But this may not be the case if your spouse is a secondary or supplementary cardholder. You have to check the credit agreement to determine if your spouse is responsible for your debt. If your spouse is liable then their credit score will take a hit when you file for bankruptcy. If your spouse fails to pay back the joint debt, their credit report will be the least of their problems. They may have to face legal actions filed by the lender.
Can You File a Chapter 13 Bankruptcy Without Your Spouse?
Yes, you can file a Chapter 13 bankruptcy without your spouse but the latter’s income will be taken into account during the proceedings. Your spouse’s income may increase your repayment plan since both household income and expenses are considered even if it was only you who filed bankruptcy.
However, you can take advantage of the marital adjustment so your spouse won’t be too affected by your Chapter 13 bankruptcy repayment plan. Under the marital adjustment, you may be allowed to exclude your non-filing spouse’s personal and separate expenses such as their car loan payments and medical expenses from their income. But you have to check with your state since marital adjustments may be viewed differently.
Will Your Bankruptcy Hurt Your Family?
The most obvious and well-known consequence of filing for bankruptcy is losing your assets. When you file for bankruptcy, whether it’s Chapter 7 or Chapter 13, you may be required to sell your property such as real estate, jewelry, and vehicles to repay your debt.
Filing for bankruptcy may affect others, too. If your spouse co-signed a loan for you, they may still be held liable to pay off part of the debt even if you filed for bankruptcy.
Filing for a Chapter 13 bankruptcy won’t affect your child’s property (e.g bedroom furniture, toys). In a Chapter 7 bankruptcy, you will still get to keep your child’s property unless the bankruptcy trustee considers it as valuable and can be sold to pay off part of your debt.
Meanwhile, your child’s bank account that’s been set up under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act is off-limits to both your creditors and the bankruptcy trustee. However, these accounts may still be considered especially when you transferred money into your child’s bank account before filing for bankruptcy. A Chapter 7 bankruptcy trustee may be able to get this money if it’s proven that you are already insolvent (you owe more than the value of the assets you own) at the time you made the money transfer to your child’s bank account.
It’s possible to file bankruptcy without your spouse. But the more important questions you need to ask yourself are if it’s a good decision and the bankruptcy impact on a spouse. You need to consider the effects of filing for individual bankruptcy on your spouse to determine if it’s better to file bankruptcy separately or jointly. You need to take into account various factors such as your assets, which ones are considered as community property and separate property, you and your spouse’s credit score and income. If you’re unsure, don’t hesitate to consult a bankruptcy lawyer so that you’ll get sound advice on what’s the best option for your situation.