How Does Bankruptcy Affect My Non-Filing Spouse?

How Does Bankruptcy Affect My Non-Filing Spouse?

Filing for bankruptcy without your spouse could have an impact on them depending on your bankruptcy strategy and the laws of your state. Below are a few ways that bankruptcy could impact your non-filing spouse.

Creditor Actions

If you file bankruptcy without your spouse on a credit account where you both hold repayment responsibility, the creditor may attempt to take action against your spouse. While your bankruptcy filing will protect you from creditor collection actions, your spouse may remain vulnerable. At the very least, they may remain on the hook for repaying the debt.

Damaged Credit

If you file bankruptcy on a credit account held jointly with your spouse, a negative entry may show up on your spouse’s credit report. However, if you don’t have joint accounts with your spouse, their credit report will not be impacted by your bankruptcy filing.

Difficulty Getting Joint Credit

While a non-filing spouse’s credit won’t be impacted if no joint accounts are involved, they may have difficulties getting joint accounts with you in the future because of your lower credit rating. For example, the year or two following your bankruptcy, it may be impossible for you and your spouse to secure a mortgage.

Loss of Property

In some cases, if you’re filing bankruptcy and surrendering property, such as the family home or vehicle, your non-filing spouse will lose access to that property. Also, if you’re filing Chapter 7 bankruptcy and your jointly held property is not exempt, your spouse may lose the property if it’s liquidated by the trustee to repay creditors. In that case, the trustee will give the non-filing spouse their share of the equity in the property and distribute your share to creditors.

How a non-filing spouse is affected by bankruptcy is a complex issue that’s influenced by many factors (including state laws and marital status). This is especially true if you’re separated from your spouse. The best course of action is to work with your bankruptcy attorney to minimize the impact bankruptcy has on your spouse.