Whether bankruptcy is the right debt relief option for you depends on a few things, including your income, what type of debt you have, and whether you’ve filed bankruptcy in the past. If you’re already pretty sure that filing bankruptcy is the way to go, but are worried about the timing, keep reading. This article will focus on how being married (or not) impacts a bankruptcy case.
Written by Attorney Andrea Wimmer.
Updated October 15, 2020
Getting married can be such an exciting time in a person’s life. You’re planning not just the perfect wedding, but your future together. If you’re in debt, you may be wondering whether you’re risking a happily ever after by bringing your debt into the marriage with you.
Whether bankruptcy is the right debt relief option for you depends on a few things, including your income, what type of debt you have, and whether you’ve filed bankruptcy in the past. But, whether you should file bankruptcy before (or after) getting married is a different question.
If you’re already pretty sure that filing bankruptcy is the way to go, but are worried about the timing, keep reading. Instead of going over whether you should file bankruptcy at all or how to do it, this article will focus on how being married (or not) impacts a bankruptcy case.
If you file Chapter 7 bankruptcy before you get married…
Before your wedding, you and your partner are treated as two completely different people under the United States 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 part of the means test
Of course, if you and your future spouse own joint property or are co-signed on 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 co-signed on one of your credit cards or a car loan. For more on how it works when there is joint debt and how bankruptcy affects a partner’s credit, check out this article.
What are the pros of filing bankruptcy before getting married?
Unlike Chapter 13 bankruptcy, Chapter 7 is a pretty quick process. Once the bankruptcy discharge is granted, you’ll be essentially debt free. 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 allows you to enter the next stage of your life - married life - without having old debts, judgments, lawsuits or wage garnishments hanging over you.
What will happen to my credit if I file bankruptcy before getting married?
About the same thing as what would happen if you file bankruptcy after getting married. Filing any bankruptcy petition always affects the filer’s credit score. How much of a drop a filer experiences depends on what their credit report was like before filing and what kind of steps they’re taking to rebuild it after filing their case.
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.
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If you file Chapter 7 bankruptcy after you get married….
… as mentioned, you can now choose between a joint bankruptcy and an individual bankruptcy. Either way, you are now a married couple and bankruptcy law deals with that differently.
The non-filing spouse’s income counts for purposes of the income limits. Before filing, you only had to include that amount of money your fiancé paid towards your joint household bills. Once you’re married, all of the nonfiling spouse’s wages are part of the means test analysis.
There is a marital adjustment to deduct any expenses the nonfiling spouse has that don’t benefit the joint household, but the bankruptcy court may need more documentation to back that up. Examples of this type of expense are student loan payments and child support or alimony obligations from a prior marriage.
So, if your soon-to-be spouse earns a lot more money than you do, filing Chapter 7 bankruptcy after getting married may not be possible.
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. Community property states consider a married couple’s property to belong to 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. The only exception to this general rule exists in community property states.
Any debt incurred while 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 (i.e. wages) any more. 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 make a full repayment of all joint debts. Otherwise, every missed payment will be reported on your spouse’s credit report.
What about 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.
But, there are things that a joint filing can complicate:
all property is part of the bankruptcy
all debt is erased by the bankruptcy
all household income is part of the means test
If one spouse owns a lot of property that is not protected by an exemption, their Chapter 7 bankruptcy case will likely be a so-called “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, but not if you want to file a joint case.
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.