Bankruptcy is sometimes the only option for a person. However, declaring bankruptcy can have a devastating impact on a person’s financial agency. If someone is legally married and on the verge of declaring bankruptcy, they are probably wondering whether their spouse is automatically included in that declaration. The good news is that a person can declare bankruptcy independently without involving their spouse. In other words, a married individual who chooses to declare bankruptcy will not cause bankruptcy for his /her spouse.
What Are Options To Declaring Bankruptcy?
A person may become overwhelmed with the amount of debt they have and may think that bankruptcy is the only solution. However, there may be a way to handle debt without having to declare bankruptcy:
- Negotiating with Lenders– If a person is currently going through financial struggles, lenders are sometimes willing to lower the amount due each month. This option is definitely worth looking into.
- Seeking Credit/Debt Counselling– There are trained professionals/companies that help people come up with a plan to eliminate debt, and financially guide them
- Debt Consolidation– Debt consolidation involves transferring various debts into one form. This way, all debt has the same interest rate / (usually a much lower one) and the same payment schedule. Some people find that this makes debt much more manageable.
- Setting up new Repayment Plan With Lenders– Some lenders may extend the length of repayment on a loan or a line of credit. This can make monthly payments more manageable.
How Declaring Bankruptcy May or May Not Impact Your Spouse
Although declaring bankruptcy does not mean the same state for the spouse, it may still impact them either way. If a bankrupt person’s spouse shared debt/loans with the bankrupt person, the bankruptcy will not impact the spouse’s credit score. However, if there is shared debt, then the financially stable spouse is now in charge of paying back the entirety of whatever is left on the loan/debt. Keep in mind that sometimes creditors can seize assets once bankruptcy is filed, so it is best to review any and all assets, as well as who they belong to.
Can A Married Couple File For Bankruptcy Together?
If both people in a marriage are overwhelmed by debt and are considering filing for bankruptcy, they have the option to file jointly. Sometimes couples pursue bankruptcy together to take away the stress that debt carries, to protect assets, and to stop wage garnishing. When filing jointly, couples can save on fees and paperwork.
Does My Spouse Have to Know That I am Filing For Bankruptcy?
Technically a person’s spouse does not need to know if the other person is filing for bankruptcy. This is possible because credit and debt can function separately even after marriage. However, like most issues in a marriage, it may help to be transparent.
What Debts Cannot be Eliminated from Bankruptcy?
Each state in the United States is different but generally, there are a few kinds of debt that declaring bankruptcy cannot eliminate:
- Child Support
- Debts from Injury
- Debts from Inflicting Injury
- Specific Student Loans
- Secured Loans – the lender will just collect the asset involved.
How to File For Bankruptcy?
- Choosing to Hire a Bankruptcy Attorney – If they can, many people will choose to hire bankruptcy attorneys. Bankruptcy attorneys file the paperwork and perform other heavy lifting for you. Filing bankruptcy can be done without hiring a layer, but having an attorney makes the process smoother.
- Figure out Eligibility-When determining bankruptcy eligibility, income, financial records, and expenses will all be looked at.
- Finding the Paper Work- Each state works a little differently but all the paper work needed can be found online.
- Complete the Paperwork- Once the proper bankruptcy forms are collected they need to be filled out as accurately as possible and taken to court.
- Counsel With Bankruptcy Trustee – Once the paper work goes through, the court will assign the individual a bankruptcy trustee. The trustee works on behalf of the creditors and helps determine how many assets they can keep.
- Go to Credit Counselling- The individual filing for bankruptcy must be educated about finances through mandatory credit counseling.
- Meeting With Creditor – This is also known as the 341 meeting. In the meeting, the individual declaring bankruptcy will speak to their different lenders and explain the financial situation.
If a legally married individual is looking to declare bankruptcy, they may be curious if they can do it independently of their spouse and how it may impact their spouse. A legally married person can file for bankruptcy on their own, and as long as assets and debts are separate between spouses, filing should not impact their spouse. Before looking into bankruptcy, it may be a good idea to consider other forms of debt management. If a person is still looking into filing for bankruptcy, there are a few steps they need to take.