Will Filing Chapter 7 Affect My Spouse?

When you’re contemplating bankruptcy, it is important to consider the whole picture and how different people in your life will be impacted. For many in this situation, their spouse is the person they worry about most. Will my spouse have to file for bankruptcy as well? Will their assets be seized? Can I file chapter 7 without my spouse? Will their credit score be affected? These are all questions you probably have if you’re considering bankruptcy. Let’s dive in and see if we can answer them.

Can I File for Bankruptcy Without My Spouse

The simple answer is yes, you can file for bankruptcy without your spouse. Any person can file for bankruptcy as an individual, including people who are married. However, your spouse will still have to be involved in the process, though to a limited degree. Your spouse will have to provide documentation, such as pay stubs and other financial documentation. This is because their income is still considered part of your household income, which will be used during your bankruptcy case. In most cases, this will be the limit of your spouse’s involvement in the bankruptcy case. They will not have to attend any hearings or appointments, unless an issue comes up that requires knowledge only they have. 

Filing Bankruptcy When Married

When it comes to filing for bankruptcy when married (and not separated), there are three possible scenarios. These are:

• One person in the marriage files for bankruptcy and the other does not.
• Each person in the marriage files for bankruptcy separately.
• Both people in the marriage file for bankruptcy together, called a joint filing.

In the first two of these scenarios, the bankruptcy operates in the same way as if a single person files for bankruptcy. The third scenario, a joint filing, works a little differently.

Joint Filing

When a married couple chooses to file jointly for bankruptcy, they act as one unit. They submit a single petition to the court. This petition lists all of their assets and debts combined. All of their eligible debts are then discharged through one bankruptcy proceeding. There are two major benefits to joint filing. These are: 

• Cost Effective: As there is only one bankruptcy, only one filing fee is required. Additionally, legal fees are often lower than if you were to file two individual bankruptcy cases. 
• Streamlined Process: Since all debts are dealt with in one proceeding, joint filing is often less complex than filing separately. This can make the process much shorter.

There are certain situations where joint filing is not advantageous. For example, if one spouse has substantial individual property they want to protect. You should consult with a bankruptcy attorney to decide which option is best for you. 

Non-Filing Spouse Liability

Non-filing spouse liability refers to the fact that your non-filing spouse may still be liable for some of the debt you want to discharge through your bankruptcy. Most married couples have joint debt. This could be credit cards, mortgage, or any other debt they have taken on together. The non-filing spouse will still be legally obligated to make payments on these debts during the bankruptcy process. Additionally, only the filing spouse’s portion of a joint debt may be discharged by bankruptcy. This leaves the non-filing spouse still responsible to pay their portion of said debt. 

Can Inheritance Be Protected from Chapter 7?

In Pennsylvania, it is possible to protect inheritance from chapter 7 bankruptcy. The first way is through an exemption. Pennsylvania provides a number of possible exemptions which can be used to protect inheritance. A bankruptcy attorney will be able to determine if your inheritance qualifies for one of these exemptions. The second way to protect inheritance is through something called the “180 day” rule. If an inheritance is accrued (ie. you have the right to it) within 180 days of filing for bankruptcy, it must be included as an estate of the estate. The filing must be amended to include the inheritance. However, if the inheritance is accrued after 180 days after filing, it does not have to be included in the bankruptcy since it is not part of the estate. 

Divorce and Bankruptcy

Divorce can significantly affect bankruptcy. If a divorce occurs during a bankruptcy, the bankruptcy trustee is likely to be involved in the divorce as well. They will have a say in how assets are divided during the divorce. Alternatively, the bankruptcy court can freeze the division of assets until the bankruptcy case is resolved, dragging out the divorce process. In most cases, a bankruptcy will complicate a divorce and an experienced attorney should be consulted.