The decision to file for bankruptcy is never an easy one. For married couples and those thinking about marrying their loved one, filing for bankruptcy can be even more complicated. Debt collection, foreclosure, and wage garnishment become not only personal problems, but your partner’s as well. To reduce the stress, here are answers to common questions about bankruptcy.
Married Couples: Questions About Bankruptcy
- Does the Means Test Consider My Spouse’s Income?
The means test assesses whether you qualify for bankruptcy, whether you file jointly or as an individual. In Chapter 7, or liquidation bankruptcy, it shows whether there’s enough disposable income to pay off debts (for both high and low income individuals). If some of your spouse’s income goes to child support and other obligations, it can be subtracted from household income as a marital adjustment.
2. What Will Bankruptcy Do to My Spouse’s Credit?
Their credit will not be harmed unless they’ve co-signed on loans or credit cards. In some cases, filing an individual bankruptcy petition may lead creditors to seek repayment from your spouse. However, if you’re concerned about their credit, Chapter 13 bankruptcy can protect them.
3. Is Joint Filing Recommended?
It can save you on filing fees, court costs, and other expenses. So, if paying down debt is overwhelming, joint bankruptcy can help, and avoids filing separate petitions.
4. Can Bankruptcy Avoid Foreclosure on My Home?
A Chapter 13, or reorganization, plan can place an automatic stay that stops creditors from taking collections actions and foreclosing on your property. A three- to five-year payment plan is created. This option also eliminates a second mortgage, which is considered unsecured debt.
5. What If We File and then Get Divorced or Separated?
Divorce or separation in mid-bankruptcy can complicate matters. Even if you receive a discharge on your debts, the non-filing spouse may still owe creditors. But you may not have to disclose your spouse’s income if legally separated. If you separated after filing, it may be possible to have two separate cases.
Questions Partners Ask About Bankruptcy
6. Will Filing for Bankruptcy Impact My Future Spouse’s Credit?
Unless you have joint accounts, filing before getting married will not hurt their credit. Bankruptcy won’t show up on their credit report. However, it can be hard to keep finances separate, especially if you own a home. Joint debts can harm credit even if you don’t get married.
7. Is It Better to File for Bankruptcy Before Getting Married?
It can help to clear up old debts before entering marriage. If there’s a default judgment in a debt collection lawsuit, you must pay it before purchasing a home.
8. What If My Partner Needs to File for Bankruptcy Too?
In this case, you can save money by waiting until after your nuptials. You’ll then have one fee for filing and one for taking a debtor education course together.
9. What Debts Can’t Be Discharged?
While there are exemptions that prevent the bankruptcy court from taking vehicles, clothing, pensions, etc., there are also debts that cannot be discharged. These include spousal or child support, speeding tickets, student loans, retirement plan loans, and debt incurred post-bankruptcy.
Contact OakTree Law
Our bankruptcy attorney in Los Angeles can help whether you’re married or about to get married. We’ll help you navigate the process, as our team is familiar with state laws and helping clients retain ownership of their homes. For help deciding the right bankruptcy protection for you, call 888-240-5132 or request a free evaluation online.