Wednesday, August 24, 2011

Bankruptcy And Spouse Liability

Bankruptcy And Spouse Liability

Are you thinking of filing bankruptcy by yourself and want to know how the bankruptcy will affect your spouse? Or do you you want to know how your spouse's bankruptcy will affect you? A few things you should know about bankruptcy and spouse liability...

Can one spouse file bankruptcy? Yes. You are entitled to file bankruptcy individually but it can have varied effects on your spouse, depending on your circumstances.

You will be protected by the automatic stay in bankruptcy when you file, but your spouse will not be. If you and your spouse have no joint debts, then your spouse will not be liable for any debts that are yours alone and included in the bankruptcy.

However, if you have jointly co-signed on loans, then your spouse is still responsible for the debt, even if a discharge is granted to you. A creditor could come after your spouse for debts that you include in your bankruptcy. The exception to this would be if you filed a chapter 13 bankruptcy, in which 100 percent of the debt is to be paid back over time. Only then will your spouse be protected.

Credit reporting agencies may report the bankruptcy on your spouse's credit report, if your spouse has co-signed on any of the loans.

If you own property with your spouse and you live in a community property state (California is a community property state), it is possible that the property could be sold and the funds used to pay off creditors.

Your bankruptcy can affect future credit worthiness for any transactions that you and your spouse attempt jointly.

Of course, it can be more complicated than this depending on variables unique to your circumstance. That is why it is so important to discuss filing bankruptcy without your spouse with a bankruptcy attorney, which I am not.

Wishing you all a fresh start,


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