How will bankruptcy affect my spouse’s debt or credit report?
The general rule is that each person’s debt in a marriage is their own. You do not automatically become liable for your wife’s or husband’s debt when you are married. People are generally responsible for their own debt, like credit card and loan applications they have signed, making them liable for the payment. It is possible to have joint debt if you are married, or if you aren’t. Joint debt means that more than one person is responsible for payment on the debt. You don’t have to be married to have joint debt with someone, but a husband and wife is the most common type of joint debt. Joint debt differs from individual debt in that both husband and wife are signing the credit application putting both of them on the hook for paying the debt. What’s important to remember is that a bankruptcy filing resulting in a discharge of debt will wipe out joint debt only if both spouses file. Generally, if you are married and have been for some time, it will be in your best interest to file a joint bankruptcy case. If you are recently married, my office can check your credit reports to see if there are any joint debts, but most likely you would know about it. Credit reporting agencies such as Experian, Equifax and Trans Union primarily use a person’s unique social security number to track their credit history and the same is true when filing a bankruptcy petition. The credit bureaus will use the social security number matched with the name of the debtor filing the petition to properly and accurately note the bankruptcy filing on that individual’s credit report. So, to answer the question, your spouse’s debt will generally not be affected if you alone file bankruptcy. This also means that your spouse will still be liable for any joint debt the both of you had. Nothing will change as far as their debts are concerned, unless you are filing a Chapter 13 repayment plan and you are paying some of the joint debt through the plan or your Chapter 7 ends up being an “asset case” in which the trustee pays your unsecured creditors some percentage after liquidating an asset.
Example #1: Married couple with NO joint debt
The husband in this marriage has a large amount of credit card debt and has no means to repay it after his recent job loss due to a long term illness. His creditors are sending the accounts to collections and he is facing legal actions by some collection attorneys. He decides to file a Chapter 7 bankruptcy petition to deal with these creditor issues. His wife maintains her own small department store credit cards, only two of which have balances. She has her own car note and pays it on time with her earnings from her job at a local hospital. Because of the fact that the husband and wife in this example do not have any joint debt, the husband can file bankruptcy by himself, an individual Chapter 7 bankruptcy, without any impact on his wife’s credit rating. Her credit score will not be affected by his filing. She is not a party to the bankruptcy. She will not have to attend her husband’s court hearing, nor supply her name or social security number. There will be no notation of a bankruptcy on her credit report whatsoever.
Example #2: Married couple with JOINT credit cards and car loans
In this example, husband and wife have significant credit card debt and most of the credit applications were signed by both of them, and is therefore joint debt. Along with the credit card debt, a vehicle that was owned and financed jointly by them was recently repossessed by the finance company and sold, leaving a large deficiency balance for which both husband and wife are responsible. Finance companies and other lenders like to have multiple people liable for the debt and that is why my office, as a Detroit Michigan bankruptcy attorney, sees quite a bit of joint debt with married couples. Usually if you are married, it makes sense for both husband and wife to file a joint bankruptcy petition. The courts treats married couples the same as an individual when it comes to the bankruptcy filing fee, and my office is no different.