While wedding vows traditionally include a commitment “For richer and for poorer”, it doesn’t mean that your personal Bankruptcy should wreak havoc on the finances of your significant other.
The effects of Bankruptcy on your spouse depend on the type of debt in question:
Declaring Bankruptcy with Individual Debt
Most people maintain and manage their own personal finances. Credit cards, bank loans, car payments—most of these obligations are attributed to a single individual, often initiated before they are even married.
If a debt is in your name alone, creditors cannot pursue your spouse for payment. In this case, you can continue with standard Bankruptcy proceedings to absolve the debt.
Declaring Bankruptcy with Joint Debts
Joint debts are where spousal Bankruptcy can become problematic. Any debt accumulated under a joint account, such as a joint credit card or a co-signed car lease, is entirely the obligation of both parties. If one party is unable to pay their share of the debt and files for protection from creditors, the second party is still expected to pay the full outstanding amount.
In this case, the entire debt remains, with its terms of repayment unchanged.
The Reality of Matrimony
Many couples have a combination of both individual and joint finances. As a rule of thumb, anything that is associated with a joint account, such as credit cards, mortgages, or any co-signed agreements will not be discharged as a result of one spouse’s personal Bankruptcy; the other spouse will still remain accountable for making all outstanding payments.
There is a benefit to such joint obligations. Since the debts are still being paid off, the associated assets will not count towards your Bankruptcy exemptions, and are not in danger of being repossessed.
Make an Informed Decision
Bankruptcy can place enough strain on a relationship without any unwelcome surprises. If you or your spouse is considering Bankruptcy, contact us today for a free consultation.