Minneapolis Bankruptcy Attorneys at Walker & Walker
If you are considering bankruptcy and married, you are likely prepared to have to file bankruptcy as a couple. This is the case for many legal issues once you tie the knot, but bankruptcy can be the exception. If you are married, you can still technically file for bankruptcy independently of your spouse, but you may not want to.
While you cannot file jointly, both spouses can file bankruptcy at the same time via two different bankruptcy cases that covers their family finances as a whole. Whether or not to file bankruptcy on your own or with your spouse all depends on who owns the majority of the debt and what would be the most beneficial for your family.
DOES MY SPOUSE HAVE TO FILE FOR BANKRUPTCY TOO?
No, only one person in a married couple needs to file. It is quite common and often useful for only one member of a married couple to file bankruptcy.
From a purely legal standpoint, you can be married and still file for bankruptcy individually. However, the matter is often so much more complex and whether or not you both need to file is dependent on several factors. The most important factor is which spouse owes the debt. Bankruptcy only discharges the debt of the person who files for bankruptcy, so if there is lots of joint debt, but only one spouse files, then the other will still owe 100% of the joint debt.
The most common types of joint debt for married couples in Minnesota are medical debts and tax debts. If you filed taxes together, then you both owe the taxes. You can do something called the innocent spouse defense, but this is done outside of bankruptcy.
IS IT JOINT DEBT?
Joint debt is debt shared between a married couple. Car loans and home mortgages, for example, are often shared debt because the couple buys those items together as co-signers. If you have a credit card that is only in your name, then this is an example of individual debt. Unfortunately, jointly held credit cards are still considered joint debt. If you have substantial individual debt, you will likely only need to file alone.
Unfortunately, tax debt (if you file jointly) and medical debt under Minnesota State Statute 519.05 are also considered joint debt. As home and car loans as well as medical debt are the big reasons for bankruptcy in the first place, you will likely have to file with your spouse to have your out of control debt discharged.
HOW WILL INDIVIDUAL BANKRUPTCY AFFECT MY SPOUSE?
If you do have enough individual debt that it merits filing alone, your spouse will still not be completely unaffected by the bankruptcy. In most cases, it simply falls on them to provide some necessary financial information on their end. However, if you are filing for bankruptcy individually, your spouse will:
- Have their credit score remain unaffected
- Be able to open and maintain individual credit cards
- Be able to finance home and car purchases
That’s right, your spouse’s credit report is not affected if you file for bankruptcy. The bankruptcy doesn’t go on the credit report. If payments to any joint debts stop being made, then those missed payments will go on the non-filing spouse’s credit score, but the bankruptcy filing itself doesn’t go there.
The real big difference is that any joint debt you have will now fall solely on their shoulders. They will now be solely responsible for home or car loans that you co-signed for as a couple after your debt is discharged with bankruptcy. However, if you have shared finances, this should have virtually no effect on the payments.
While individually filing for bankruptcy has minimal effect on your spouse, you will have their income reported and counted towards your overall income. What this means for you is that it is less likely that you will be able to qualify for Chapter 7 bankruptcy. Instead, it is likely that you will want to choose a Chapter 13 bankruptcy and its repayment plan.
Contact Us For A Free Evaluation Of Your Financial Situation
There are a number of different factors that you need to consider when deciding if you should file for bankruptcy individually or with your spouse. Unfortunately, every family and their financial situation is different. Some couples would benefit from filing individually more than others would. The only way to know for sure if to talk to a legal professional about it.
If you are married and considering bankruptcy, contact us today for a free evaluation of your financial situation. The professionals at Walker & Walker can help you make the right decision on how you need to file as a married couple and walk you through the bankruptcy process every step of the way.