I am often asked whether filing bankruptcy affect the non-filing spouse. Simply the answer is yes, the bankruptcy will likely affect your spouse. See below for the descriptions of how your non-filing spouse could be effected.
I am often asked this when consulting with a prospective client where one spouse is in financial trouble and the other non-filing spouse has a good job and little to no debt issue. Often, the situation is that the spouse in the better financial situation does not want the other spouse’s debt issues to impact his/her income or the assets that they hold jointly.
Things to know about filing bankruptcy when you are married:
- It is not a requirement that a married couple both file bankruptcy together. You can file your bankruptcy without including your spouse as one of the Debtors in the case, but it will indicate on the bankruptcy filing that you are married and that your spouse did not file.
- Your non-filing spouse will have to provide income information. Bankruptcy requires a lot of financial disclosures. The bankruptcy process takes into account the household size, household income and household debts. This information is used in the means test to determine whether a person is eligible to file chapter 7 bankruptcy. Alternatively, in a chapter 13 bankruptcy, the information determines the plan payment amount and the length of the plan (36 or 60 months). This means even though your spouse did not file bankruptcy, the non-filing spouse will have to provide information for the disclosures to be accurate.
- The non-filing spouse’s credit should not be effected. Your spouse is not providing his/her social security number, so his/her creditors and/or employment will not be notified of a bankruptcy. However, be warned that joint accounts will show that the obligation was included in a bankruptcy and automatic payments may stop. You may have to pay with good, old fashion checks since the electronic and phone payment options may not be available for the first few months of your bankruptcy.
- The trustee will know if you try to hide your non-filing spouse’s income. A federal bankruptcy filing is done under penalty of perjury. In addition to the filing, you will need to provide support documentation and testimony to support your filing information. The trustee will be looking at bank statements, paychecks, tax returns and other financial documentation. Once the trustee finds out that you tried to hide your non-filing spouse’s income, then the trustee will likely get more aggressive because he/she will be wondering what else you were trying to hide.
- Household Income is the standard even if you keep everything separate. Unfortunately, even if you are a couple that keeps your finances separate, the bankruptcy process looks at the expenses of the household all coming out of the same pot of income.
To find out details and information about how a bankruptcy filing could affect your spouse in your particular situation, schedule your free consultation (305) 278-0811 with one of the bankruptcy attorneys in our office!