In marriage the vow “for better, for worse” acknowledges that a couple may experience substantial hardships that will test their commitment to each other. One hardship that is unfortunately common is financial difficulty that can seriously impact a family’s entire standard of living. When debts and monetary setbacks become more than a couple can reasonably manage, bankruptcy is often considered. Bankruptcy can allow a couple a chance to start over without substantial debt or give them a chance to repay debt in a more reasonable and affordable manner. However, there are things every couple considering bankruptcy should know before they file for bankruptcy relief.
Each married couple has property that is owned separately and marital property that is owned jointly. When both spouses are filing for bankruptcy, property ownership is not usually an issue since everything the couple owns will eventually become part of the bankruptcy proceedings. When only one spouse decides to file for bankruptcy, things can get a bit complicated. The spouse who is filing will need to include all of his or her individually or separately-owned property in the bankruptcy estate along with half of the property owned jointly with the spouse.
Non-Filing Spouse Protection
Occasionally, one spouse may refrain from filing for bankruptcy because he or she is not in as much debt or has other reasons for not wanting to go through bankruptcy proceedings. When one spouse does not file, he or she is not able to benefit from the same debt collection protections that the other spouse receives. The non-filing spouse must still continue to pay jointly-held debts and is at risk of facing aggressive collection actions from creditors who discover that one spouse has recently filed for bankruptcy protection. While in some situations, one spouse filing Chapter 13 can protect the non-filing spouse, it is important to understand that a spouse who does not file jointly may face additional collection activities and penalties.
Joint Credit Consequences
Regardless of who files, both partners will deal with the long-term credit consequences associated with bankruptcy. Even though each spouse has his or her own unique credit file with a credit report, once a couple is married and sharing marital debt, the bankruptcy filing of one spouse could be reported on both credit reports. This reporting could negatively impact the ability of the non-filing spouse to obtain credit even if he or she does not include the spouse who is in bankruptcy on the credit application. When attempting to make large purchases such as homes or vehicles the bankruptcy status of the non-filing spouse could make loan approval extremely difficult.
Consult an Attorney
The decision to file for bankruptcy is never easy, and once a person is married, there are additional considerations involved. Prior to making a decision, consulting a qualified bankruptcy attorney is recommended since it increases your chances of making an educated decision that takes your own unique circumstances into account. The attorneys at Adam Law group understand how much thought goes into any choice involving bankruptcy and we are dedicated to making sure you have all of the information necessary to make a decision that best suits your individual needs. Contact us today to schedule a consultation at our conveniently located Jacksonville, Florida office so that we can begin providing you with the legal advice you deserve.