Chapter 13 Bankruptcy Blog

Posts containing useful information about Chapter 13 for anyone considering a North Carolina bankruptcy lawyer.

Filing Bankruptcy While Married

If you’re considering filing bankruptcy while married, you’re not alone. Thousands of married couples are in your situation, and the bankruptcy filing statistics are easily found online, showing you that you’re not alone. The good news is one spouse can file bankruptcy without affecting the credit of the non-filing spouse. This article contains an examination of a few scenarios where you may want to file bankruptcy while married—even if your spouse isn’t filing with you.

One Spouse’s Debt Can Cause Anxiety In A Relationship

If one spouse brings debt to marriage, despite best intentions, the other spouse may feel resentful of the pre-marriage debt. At the very least, as a couple, you deserve a ‘fresh start’ together and that includes being free of debt you did not decide to incur together.

Computing The Means Test In Bankruptcy

If you’re filing bankruptcy while married, you will need to disclose the income of both spouses. This is done for the purpose of passing The Means Test in bankruptcy. The reason is that the federal bankruptcy code uses household income as the starting point for determining whether you qualify for bankruptcy. If you live with your spouse, you’ll need to count their income. The good news is most couples still qualify even when counting the income of their spouse.

Lastly, there is an option to take a Marital Deduction on The Means Test. This option allows you to more accurately show the court the amount of the household income which is being used by the non-filing spouse. Ultimately, this deduction reduces your income for The Means Test. The deduction is easy to calculate and your bankruptcy attorney will walk you through it.

Protecting Your Spouse’s Credit In Bankruptcy

Your spouse’s credit will not suffer due to your bankruptcy. Your bankruptcy will not show on their credit report, nor will it come up when applying for credit of any kind. When one spouse files for bankruptcy, the bankruptcy only affects the debts of the spouse who is filing. In other words, the marriage does not change the effect of bankruptcy from a credit standpoint.

Protecting Your Spouse’s Assets In Bankruptcy

None of your spouse’s own assets will be affected by your bankruptcy. If you have joint assets such as a house or a jointly owned vehicle, those assets can typically be protected in bankruptcy. The good news is only half of their value is counted for your bankruptcy filing when married. Lastly, if your spouse has a 401k or savings account in their name only, those assets are not part of the bankruptcy filing.

Joint Debt In Bankruptcy

If you have joint debt with your spouse, you may want to consider filing together. However, it is still perfectly fine to file without your spouse. One thing to consider is the obligation on a joint debt. Most marital debt obligations are “joint and several” liability. This means that both spouses are obligated for the full balance of the debt. If one spouse file bankruptcy, that spouse will no longer be responsible for the debt; however, the non-filing spouse will still be responsible for the entire balance of the joint debt. If the non-filing spouse decides to file at a later date, that would of course eliminate their obligation on the debt.

Your non-filing spouse may choose to attempt Debt Settlement instead of filing bankruptcy. This is a common way to successfully address a small amount of joint debt or debt that belongs only to the non-filing spouse.

Vehicles In Bankruptcy When My Spouse Isn’t Filing

The only vehicles which must be disclosed as assets are those vehicles that are titled in the name of the individual who is filing. If you transferred title to a vehicle from one spouse to another within four years of filing bankruptcy, that transfer should be disclosed in your bankruptcy filing. The transfer most likely will not negatively affect your bankruptcy filing, but disclosing it is in alignment with the court’s requirements for full disclosure of all transfers to family members and “insiders” (family and friends) within a four-year period preceding your bankruptcy filing.

Further Reading

You can read hundreds of articles like this one on our Bankruptcy Blog.

Speak With A Bankruptcy Lawyer Today

If you’d like to set up a free consultation about filing bankruptcy while married, you can call us at 704.749.7747 or click to request a FREE CASE EVALUATION and we will reach out to you. We know you have choices, and we hope you choose to Recover With Us.

How Does Bankruptcy Affect You?

While this question is general, we understand the concern. Most clients want to understand what it will be like during their bankruptcy, right after their bankruptcy, and a few years down the road from bankruptcy. This article is meant to address the question “How does bankruptcy affect you?” and we hope it helps. You can also read more specifically about how quickly you can file bankruptcy, or about Chapter 7 or Chapter 13.

How Are Things Right Now?

It’s important to put things into perspective when wondering how bankruptcy will affect you. It’s worthwhile to take stock of some of the experiences you’re having currently. They may include:

Creditors Pursuing You

No Savings For Emergencies

Inability To Save For The Future

Feeling Like You’re Failing Financially

Stress And Anxiety

All of these are very real concerns. Filing bankruptcy helps every single one of these concerns, from the moment you decide to file.

What Happens When I File Bankruptcy?

Creditor Calls Stop—Creditors are no longer allowed to contact you or pursue the debt, in accordance with The Automatic Stay in bankruptcy. You get this protection from the day your bankruptcy lawyer files your case. We have addressed Credit Cards In Bankruptcy in a prior article.

Savings Increases—You immediately stop paying creditors with your hard-earned income, and can use those funds to make sure rent or mortgage is paid. You can make your car payments on time. Or, if there is extra money left over, you can put it aside for savings.

You Feel Financially Healthy—With all of your unsecured debt gone, the immediate effect of bankruptcy is to free you from the burden of having overwhelming debt that you can’t keep up with over time.

Stress Melts Away—It’s amazing how stressful financial situations are. Without aggressive creditors calling you and reminding you every day that you owe them money, you’re free to focus on what’s important to you. The household budget is suddenly ‘balanced’ and you can afford necessities.

Credit Score—Immediately after filing bankruptcy, your credit score will drop due to the filing. Unless your credit was perfect before filing, you’ll find this dip in your credit score is a small price to pay for all of the benefits you receive upon filing bankruptcy. You can read more about your Credit Score In Bankruptcy as well.

How Does Bankruptcy Affect You One Year After Bankruptcy?

Credit Score—About a year after filing bankruptcy, your credit score will recover to where it was just before filing. From there, you can continue to rebuild your credit quickly.

You’ll Receive Credit Card Offers—While most clients swear off credit cards upon filing bankruptcy, receiving offers for credit cards a year after filing bankruptcy is a sign of healthy credit. It means if you do decide to buy a car or need credit, it’s available for you. The reason for this is when you file bankruptcy you eliminate a lot of debt. From a creditor’s standpoint, you become a great candidate for extending credit. Creditors also know you can’t file bankruptcy again for roughly eight years, so they count on you paying your monthly credit card bill if they offer you a credit card.

You’ll Have Opportunities To Save—With high monthly payments to creditors out of the way, you will find that each month you can set aside some money. This may be for savings, a future vacation, or some other necessity life brings your way. The peace of mind that comes with having some savings is priceless.

How Does Bankruptcy Affect You A Few Years After Bankruptcy?

Your Credit Score Fully Recovers—While bankruptcy may stay on your credit report for about 8 years, it doesn’t mean your credit score can’t recover much sooner than that. By making on-time payments on mortgage, car, or other debt, you’ll accrue a good credit rating over time.

You Can Buy A House—Two years after filing bankruptcy, you’ll become eligible for some federal loan programs for purchasing a home. Four years after filing, you’ll become eligible for most private funding available on the marketplace from lenders like Quicken, Wells Fargo, or other mainstream mortgage providers.

You’ll Know You Made The Right Choice—With all of the financial options in front of you, and with all of your debt behind you, your decision to file bankruptcy will reveal itself as one of the best decisions you’ve made for yourself and your family.

Further Reading

How Does Bankruptcy Affect My Spouse?

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Speak With A Bankruptcy Lawyer Today

If you would like to get some questions answered, or take the next steps toward a painless bankruptcy filing, call us at 704.749.7747. You can also click for a FREE CASE EVALUATION and we’ll reach out to you. We know you have choices. We hope you choose to Recover With Us.

How Much Does Chapter 13 Cost?

In the Western District of North Carolina, the court sets the attorney base fee at $4,500.00. However, you do not owe all of those funds prior to filing. You and your bankruptcy attorney will agree upon an amount you will pay prior to filing; the remainder will be built into your Chapter 13 plan and paid over the course of your Chapter 13 case. There are also court filing fees, but again, those can typically be paid overtime as part of your Chapter 13 plan payment.

What Determines My Chapter 13 Plan Payment?

Your Chapter 13 plan payment is a combination of both your ability to pay and a comparison to what your creditors would receive if your assets were liquidated in a Chapter 7 bankruptcy filing. Additionally, if you have mortgage arrears (missed payments) or vehicle lender arrears, those will need to be paid overtime in your Chapter 13.

Ability To Pay In Chapter 13

Your ability to pay is simply a look at your ongoing monthly income and expenses. Your bankruptcy attorney will propose a payment to the court. This proposed payment will be examined. Essentially, any leftover funds each month after your ongoing household expenses are paid should be your minimum monthly Chapter 13 payment.

Arrears And Other Priority Debt

If you have mortgage arrears, as mentioned above, those will need to be built into your Chapter 13 plan payment. Additionally, if you have IRS or state tax debt that is less than three years old, that will need to be re-paid in the plan. Your attorney will calculate your payment on these items, in addition to a small percentage to be paid to your unsecured creditors. These calculations will be compared to your budget, or your “Ability to pay” as discussed above. If your budget supports the proposed monthly payment, your plan should be approved by the court.

Length Of Your Chapter 13 Plan

Most Chapter 13 plans are five years or 60 months. If you want to propose a shorter plan, you will typically be required to pay the same amount but over a shorter period of time. In many cases, if you propose a plan shorter than five years, it must be a 100% plan. This means that your plan proposes to pay your unsecured creditors 100% over the course of the Plan. A typical five-year plan will pay somewhere between 1% and 15% to the unsecured creditors, depending upon the factors mentioned in this article.

Speak With A Bankruptcy Attorney Today

The easiest way to get a better idea of what your Chapter 13 plan payment would be is to speak with a Charlotte bankruptcy attorney today. You can call us at 704.749.7747 or click for a FREE CASE EVALUATION. After a brief discussion with an attorney, and after submitting some documentation, we will be able to estimate a Chapter 13 plan payment for you. We can also confirm if Chapter 7 or Chapter 13 is the best choice for you.