Will Bankruptcy Affect My Spouse?
When you consider filing for bankruptcy, if you are married you will have to decide whether to file jointly or separately. If you decide to file jointly, it will be important to know: what will happen to your spouse?
What happens to your spouse will depend most heavily on whether your debts are yours alone, or whether the two of you share any debt. The most common shared marital debts are things like a mortgage, and guarantees on other loans. However, in many Western states, such as Arizona and California, most debts that your accrue during your marriage will be jointly shared by you and your spouse, unless you take some action to declare otherwise.
If you share a debt with your spouse, filing for bankruptcy separately may adversely affect your spouse. In many loan agreements, bankruptcy filings trigger default. This means that, even if you are current on payments on a shared obligation, when you file for bankruptcy the creditor may go after your spouse. One way to avoid this is to file jointly. Another way is to file for Chapter 13, which will permit you to utilize the co-debtor stay, preventing creditors from going after anyone who is obligated on one of your loans.
Be aware that many collection agencies will attempt to scare you into paying debts or into avoiding bankruptcy with threats against your spouse. This is often just a scare tactic, and can be illegal. To know what your rights are, and the options available to you, it is important to talk to a qualified bankruptcy attorney.
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