Even the most stable couples go through bankruptcy, and with the right help, they are able to overcome it.
While we typically think of shared marital debt, couples today marry later in life and live together without marrying far longer, waiting around five years on average to get married accordingly.
Since couples are not sharing finances until later in life, it is simply facile for one spouse to be in debt but not the other. Due to these changes, some may consider filing for personal bankruptcy without including their partner. But remember, your bankruptcy can still impact your partner financially, legally, and emotionally.
When Couples Merge Their Debts
Debts incurred by each partner before marriage (such as credit card debt or student loans) will remain attached to the respective individual. However, the responsibility for debt incurred after marriage will be shared.
The debts that you and your partner might incur after marriage include the following:
- Joint purchases such as a home or car
- Cosigned loans
- Debt charged to a shared or joint account
Married couples can file for bankruptcy individually or jointly. There are advantages and disadvantages to both. It basically depends on the types of debts and unique financial situations of the couples involved.
Chapter 7 versus Chapter 13 For Couples
Usually, couples file for Chapter 7 bankruptcy, which involves liquidating some assets to aid in paying their debts. You must get through the Means Test to qualify for Chapter 7 bankruptcy, which is possible if your income is lower than the household median. You may also allow it if your disposable income after paying monthly bills is below an actual threshold.
Chapter 13 bankruptcy is another choice for your spouse and yourself. It allows you to avert liquidating your assets while discharging some or all your unsecured debts, like tax debt. However, Chapter 13 bankruptcy comes with a repayment plan of 3 to 5 years and a substantial hit to your credit score.
It is better to file either chapter as a couple if you have numerous joint debts. If your spouse has most of the debt, it is probably to file individually.
Personal Bankruptcy
Your spouse’s assets must be protected if you file for personal bankruptcy. That means your partner’s separate accounts and property brought into the relationship remain untouched if you have yet to add or contribute to these accounts with your assets.
However, property acquired during the relationship can typically be divided.
A bankruptcy on the part of your partner should not and will not affect your credit score. However, this is a complex issue, and speaking with your local bankruptcy lawyer for advice is definitely recommended.
The Stress of Debt and Bankruptcy on Married Couples
Even though divorce rates in the U.S. are declining, finances are one of the most vital sources of stress for married couples. One recent study found that fifty-four percent (54%) of respondents genuinely believe having a partner who is in debt is an important reason to think about divorce.
Emotional Impact It Brings
Although only one spouse files for bankruptcy, the process emotionally strains the relationship. Although bankruptcy differently affects each connection, and much of the financial stress caused by debt can be disregarded, most couples must adjust their lifestyles to deal with the new economic reality.
These changes can pressure a couple and cause resentment or anger, especially if the debt is held primarily by one partner.
Having honest, open conversations about staying organized and making it through bankruptcy without irreparable damage to your relationship is crucial. You will each have questions. By genuinely opening the lines of communication, you can sustain realistic expectations for how the decision will affect each of you. You will face difficulties as a couple; it is crucial to have a practical angle.
Our Bankruptcy Lawyer Can Help You and Your Spouse
If you are in unmanageable debt but are hesitant to file for bankruptcy, talk it over with The Law Offices Of Ronald E. Stadtmueller. Bankruptcy is not a decision to make casually. However, improving your personal and financial health might be the right option.
Our bankruptcy San Diego Attorney can help. Call our firm now and schedule a free consultation anytime by calling 858-564-9310. Do not let your debt ruin your relationship. Let The Law Offices Of Ronald E. Stadtmueller’s Attorney help.
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