If you’re planning to get married and you also need to deal with debt, you’re probably wondering when to file bankruptcy and how it will affect your spouse. There are pros and cons to filing for bankruptcy before marriage as well as filing after marriage. If you want to start your marriage with a clean financial slate and you qualify for Chapter 7, that’s a relatively quick way to achieve that goal. If you already have joint debts with your spouse-to-be, you may want to file after you get married to take advantage of more generous exemptions.
Written by Attorney Andrea Wimmer.
Updated March 9, 2022
Getting married can be such an exciting time in life. You’re planning not just the perfect wedding but also your future together. But sharing a life together often means sharing your financial wellness as well. If you're starting your marriage with a lot of debt, that "for richer or poorer" aspect comes into play a lot sooner than you might be comfortable with. You may be wondering if you're risking your happily ever after by bringing your debt into the marriage with you.
There are typically several debt relief options available to you, but depending on your income, the type and amount of debt that you have, and your financial history, it could be that bankruptcy is your best strategy.
If you’re already pretty sure that filing bankruptcy is the way to go, the next question to ask yourself is whether you should do it before or after you get married. Whatever you decide could affect not only yourself but your future spouse as well. This article focuses on how being married (or not) impacts a bankruptcy case.
Filing Chapter 7 Bankruptcy Before Marriage
Before your wedding, you and your partner are treated as two completely different people under the U.S. Bankruptcy Code. Here’s what that means:
Only your property is part of your bankruptcy.
Only your debt is erased by your bankruptcy.
Only your wages are considered in the means test.
Of course, if you and your future spouse own joint property or have co-signed a debt together, it will come up in your bankruptcy case. But that has nothing to do with whether you’re married. It would be exactly the same if your mom was a co-signer on one of your credit cards or a car loan.
The Pros of Filing Bankruptcy Before Marriage
Unlike Chapter 13 bankruptcy, Chapter 7 is a pretty quick process. Once the court grants your bankruptcy discharge, you’ll be free of all dischargeable debts incurred before filing. This can happen as quickly as 4-6 months. While Chapter 7 bankruptcy doesn’t eliminate all types of debt, it will erase credit card debt, medical bills, personal loans, old apartment leases, and the like. It also allows you to enter into your married life without having old debts, judgments, lawsuits, or wage garnishments hanging over you.
What Happens to My Credit if I File Bankruptcy Before Getting Married?
Filing any bankruptcy petition will affect your credit score. How much bankruptcy will impact your score depends on the shape your credit report is in before filing and how proactive you are about rebuilding your credit after filing. In other words, about the same thing as what would happen if you file bankruptcy after getting married happens if you file before the big day.
Can I File an Individual Bankruptcy Case After Getting Married?
Yes — you absolutely can. While married couples can file a joint bankruptcy case, they’re not required to do so. That means you can file bankruptcy without your spouse even after you get married.
Filing Chapter 7 Bankruptcy After Marriage
After you’re married, you can choose between filing a joint bankruptcy and individual bankruptcy. Either way, if you’re part of a married couple, bankruptcy law deals with that differently. Here are some of the main things it will affect.
There are certain income limits to filing a Chapter 7 bankruptcy. When you complete the means test to see if you’re eligible to file Chapter 7, you have to include all of your income to compare it to your monthly expenditures. If you file before you get married, you only have to include the amount of money your fiancé pays toward your joint household bills. If you file after you get married, all of your their income will count toward the income limits on the means test.
This will necessarily increase your household income quite a bit. The good news is that the Bankruptcy Code provides a marital adjustment that allows you to deduct any expenses the non-filing spouse has that don’t benefit the joint household. Examples of this type of expense are student loan payments and child support or alimony obligations from a prior marriage. The bankruptcy court may need you to provide documentation to back these claims up.
What does this all mean? If your soon-to-be spouse earns a lot more money than you do, it may not be possible to file Chapter 7 bankruptcy after you get married.
Property & Exemptions
Whether all of your property or only joint property is part of your bankruptcy depends on whether you live in a common-law state or a community property state. In community property states, a married couple’s property is considered the property of both spouses, no matter who paid for it.
That means anything you and your spouse buy with your income after the wedding is part of the bankruptcy estate even in a case filed only in one spouse’s name. In a common-law state, only joint property is part of your bankruptcy. The non-filing spouse’s separate property isn’t part of it.
Exemptions usually apply to single people but married couples are often able to double some or all exemptions. State law determines whether exemptions can be doubled for one spouse’s bankruptcy in an individual case. Whether it’s real estate, money in your bank accounts, or that beautiful new toaster oven you got at the wedding, the bankruptcy trustee can only touch it if it’s not covered by an exemption.
Debts & Credit Rating
Your bankruptcy filing only affects your debts. That’s true whether you file bankruptcy before getting married or after. One exception to this general rule is if you live in a community property state where any debt your incur while you’re married is considered community debt.
If one spouse files bankruptcy, the non-filing spouse receives the benefit of a so-called community discharge. This means creditors can’t come after the non-filing spouse’s community property anymore, including their wages. But creditors can still go after any separate property they inherit or get as a gift.
Whether you’re in a community property or common law state, if you’re worried about preserving your spouse’s credit score, there is only one way to accomplish this: Your spouse has to fully repay all joint debts. Otherwise, every missed payment will be reported on your spouse’s credit report.
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Filing a Joint Bankruptcy Case
Only married couples can file a joint bankruptcy petition. Depending on your financial situation, waiting until after you're married to file a joint case may make sense. Especially since that means only paying one court filing fee instead of two.
There are things to keep in mind about a joint filing:
All household income is part of the means test — this could make it so that your household income exceeds the income limit on the means test and limits you to a Chapter 13 filing.
All property is part of the bankruptcy — if your spouse owns property not protected by an exemption, it’s possible that it could be sold as part of the bankruptcy.
A joint bankruptcy will affect both of your credit scores — if your spouse also has a lot of debt to include in the bankruptcy, a fresh start might be good for both of you; but a Chapter 7 will be attached to their credit report regardless of how much personal debt they’re able to have discharged.
If one spouse owns a lot of property that is not protected by an exemption, their Chapter 7 bankruptcy case will likely be what is called an asset case. Asset cases tend to stay open much longer than no-asset cases, where creditors receive nothing.
Another complicating factor is the means test. It’s possible that both of you qualify for Chapter 7 if you file an individual bankruptcy case before getting married, but not if you want to file a joint case after the wedding.
Schedule a Free Consultation With a Bankruptcy Lawyer To Learn More
You don’t have to hire a lawyer to file Chapter 7 bankruptcy. But, since there are so many moving parts to consider, it’s not a bad idea to take an hour out of your day for a free consultation with a local bankruptcy attorney. While you’re probably plenty busy with wedding planning, it can help clarify your debt relief options. Law firms generally offer free evaluations to potential new bankruptcy clients, so you have nothing to lose.
Often filing bankruptcy before getting married is the best way to start your new life together on a clean slate. This is especially true if only one of you has a lot of debt. Whether it makes sense for you to file Chapter 7 bnakruptcy before getting married depends on the specifics of your situation. Talking to a bankruptcy lawyer or seeking free non-profit credit counseling can be a great first step to figuring out the best path forward.