I had a conversation with a client today about this very issue. While married bankruptcy clients have the ability to file solely or jointly, there are considerations which affect that choice. The primary consideration is usually protecting the non-filing spouse’s credit. The second consideration is usually protecting property owned by the non-filing spouse. Lastly, one spouse may have more income than the other and clients want to know how this affects their ability to file.
Non-filing Spouse’s Credit
The credit score of a non-filing spouse is generally not affected when one spouse files bankruptcy. One exception would be where you have co-signed for debt together. In that case, there may be a temporary lowering of the non-filing spouse’s credit score. You will not know the exact effect on the score until after filing. It is important to determine whose name is on which debt, prior to filing. Your Charlotte bankruptcy attorney will assist with that.
Protecting Property in Bankruptcy
If one spouse files bankruptcy and another does not, property owned solely by the non-filing spouse will often be protected from creditors in the bankruptcy. If the property was recently transferred out of the filing spouse’s name into the non-filing spouse’s name, the result may change. In these instances, the court examines how long ago the transfer was made and the reasons behind the transfer. There are some instances where the court will ‘undo’ the transfer for the purpose of determining whether you qualify for bankruptcy. With careful planning, your filing can survive this.
Non-Filing Spouse’s Income
Even if a married person files for bankruptcy without their spouse, the income earned by the non-filing spouse must be included in the means test calculation. The bankruptcy code requires this to be sure the contributions of the non-filing spouse to household expenses and the care of dependents (kids, grandma) are being considered. This is nothing to fear, and it makes sense. Remember, the court is trying to get an accurate picture of what your income to expense ratio looks like on a monthly basis. If you and your spouse are having trouble making your monthly bills with your combined income, you will probably still qualify for filing by yourself.
If you would like to speak to an attorney today about your individual situation, please call me at 704.749.7747. I’d be happy to explain your options. Information is free and I encourage you to take advantage of it– a phone call is often the first step toward freedom. You can also email me here.