Protecting A Spouse When Filing Bankruptcy

Many married couples face the dilemma of how to file bankruptcy without bringing the other spouse into the equation. While there are no laws that require a married couple to file bankruptcy together, there are laws that could still impact the other spouse when filing separately.

Minimizing The Damage

One way to resolve debts in marriage file for bankruptcy separately, as an individual.  When a married debtor files for bankruptcy separate from their spouse, they are attempting to resolve their debts without impacting their spouse. This is best when one spouse holds the majority of the debt burden. However, any jointly held debts could still leave the spouse subject to creditors since filing for bankruptcy as an individual can only resolve individual debts that are tied to that filer only.

When a filer enters bankruptcy with jointly held debts, the debts may be resolved but the creditors still maintain the right to collect from the non-filing spouse. Any assets that the non-filing spouse owns may also be at risk when filing separately in marriage.In order to prevent this from happening, consider filing for Chapter 13 bankruptcy. Filing for Chapter 13 can prevent any assets from being liquidated, as long as the debtor maintains the payment schedule as outlined in the plan. Not only will the debtor and spouse be at less risk of losing assets, they will also have their debts resolved without worrying about further collection efforts from creditors. Once a debt had entered the Chapter 13 plan, creditors will not be able to collect on that debt outside of the plan. Further, the debtor can be sure that their credit is better protected, while the spouse can rest assured that their credit will not be entered into the bankruptcy process.