Can One Spouse File Bankruptcy?

The short answer is “Yes.”  According to U.S. federal bankruptcy rules, one spouse may act as a soul petitioner when filing for bankruptcy protection under Chapter 7 or Chapter 13 bankruptcy.

The long answer is slightly more involved.  Whether it is advisable to file bankruptcy without your spouse depends entirely on your personal circumstances and thoroughly weighing whether Chapter 7 vs Chapter 13 bankruptcy is more beneficial for you.  In a nutshell, if your debt is in your name only and your spouse has not co-signed contracts, loans, credit or mortgages you are named in, then the debt is yours alone and bankruptcy may have little impact on your partner.

Obtaining the advice of an experienced bankruptcy attorney will be valuable in this regard.  A bankruptcy lawyer knows the benefits and limitations of Chapter 7 vs Chapter 13 bankruptcy and can explain the bankruptcy rules in detail.  This is essential for making an informed decision that allows you to keep as much of your property and assets as possible in the event you bankrupt.

“How will bankruptcy affect my partner?”

Shared credit cards, mortgages and car loans are examples of debts that both spouses are equally liable for.  When your debts are shared, the effects of bankruptcy on your partner can be drastically different depending on the filing spouse’s decision to petition under Chapter 7 vs Chapter 13.

According to U.S. personal bankruptcy rules, cases in which one spouse petitions for Chapter 7 bankruptcy discharge from shared debts, the non-filing spouse will assume total responsibility for repaying the creditors in full.  Also worth noting is that in Chapter 7 bankruptcy cases where the only one spouse is filing bankrupt, the non-filing spouse will not have the benefits associated with bankruptcy protection, such as automatic stays and bankruptcy discharge from debt.

Depending on the various federal or state bankruptcy exemptions for which you may qualify, it may be more beneficial overall for your spouse to file for bankruptcy discharge with you.  Often married couples may double the allowed exemption values, thereby protecting more assets and personal property than would otherwise be possible if one spouse filed alone.

It is important to note that even if your spouse chooses to not file bankruptcy their income will still be attributed to you.  In the event that your spouse’s income is sufficient, you may be found ineligible for Chapter 7 liquidation bankruptcy.  If this happens you may choose to withdraw your bankruptcy petition entirely or file for a Chapter 13 reorganization and repayment plan.

Chapter 13 bankruptcy rules, however, allow co-debtors – including non-filing spouses – to be protected by a co-debtor stay.  The stay prevents creditors from focusing all of their collection efforts on the co-debtor while the bankruptcy petitioner works with a Trustee to reorganize the debts and negotiate a repayment plan.

Whether you are wrestling with Chapter 7 vs Chapter 13 bankruptcy benefits and drawbacks, the U.S. Bankruptcy Code allows for a non-filing spouse in a “community property state” to share the benefits of their spouse’s bankruptcy discharge, as a matter of law.  Individuals and couples considering petitioning for bankruptcy discharge or protection should seek the counsel of a bankruptcy lawyer to determine if your state is a community property state.

In terms of how one spouse going bankrupt will affect the credit of the non-filing spouse, if you share joint debts, you can expect the bankruptcy to be noted in some way on the credit record of the non-filing spouse.  If your debts are separate, however, one bankruptcy should not be reflected in non-filing spouse’s credit reports.   Within 6 months of filing bankrupt, have your spouse check their credit rating.

bankruptcy attorney can explain all of the Chapter 7 vs Chapter 13 bankruptcy rules, the consequences and benefits of going bankrupt as an individual and as a couple, and how to achieve a bankruptcy discharge from debts.  Contact a bankruptcy lawyer in your area for professional advice on the effects of filing bankruptcy without your spouse.

Natalie Conatser

Author: Natalie Conatser

Natalie is a finance professor who writes all about finance as a blog contributor. She is a board certified accountant and also knows a thing or two about debt and avoiding bankruptcy. Natalie plans on touring the US to speak about personal finance.

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