Will filing for Chapter 7 bankruptcy affect my spouse?

If you’re filing for Chapter 7 bankruptcy and your spouse is not, you may be wondering whether they are going to be affected. The short answer is that if your debts are separate, their credit will not be impacted.

What if I share debts with my spouse?

If you and your spouse are on a shared account, then only your obligation to pay the debts is erased. Creditors will still be able to come after your spouse for the debts. Your bankruptcy may also show up on your spouse’s credit report, although it should not affect your spouse’s credit score as long as they remain current with all the payments.

What if we want to apply for joint loans or credit accounts together in the future?

You and your spouse will still be able to apply for joint loans or credit accounts in the future. For a while, your bankruptcy filing may impact your ability to get a joint loan with good terms. But, most people with poor credit who file for bankruptcy see their credit scores increase when compared to people with poor credit who remain in debt. So, as you rebuild your credit score, you're ability to get favorable terms on new loans will increase as well.

How does my bankruptcy affect our property?

If you own property together, but it's worth less than the available exemptions, your bankruptcy will have no effect. If you or your spouse owns a home, it'll be protected by the homestead exemption as long as it's not worth too much.

It gets trickier if your spouse owns property that is worth more than what you’re able to keep during your bankruptcy. Depending on where you live, any property that your spouse purchased during your marriage may be considered to be joint property, even if your spouse purchased the property with a separate financial account.

Community Property States

This rule applies in “community property states,” which include Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin. In these states, both spouses have joint and equal ownership over most property acquired in the marriage even if only one spouse is on title.

Debtors not located in one of these states generally do not have to worry about the trustee coming after their spouse’s property during a bankruptcy, even if the spouse owns property worth more than what the exemptions permit.