If you’re married and considering filing for individual bankruptcy in The Woodlands, TX, you’re probably wondering how that will affect your spouse. After all, when you get married, you legally share debts incurred in your names after marriage—so what does that mean when you can’t afford to repay those debts? Does it matter if the debts were incurred before marriage? These questions depend on your state’s property laws, what kind of bankruptcy you file for, whether you file individually and whether the debts are in both your names.
If you file bankruptcy individually when married in The Woodlands, TX, you may negatively affect your spouse’s credit, their ability to repay their own debts and more. Here’s how to decide what to do and who should file—and as always, consult with a bankruptcy attorney before making any important decisions.
Bankruptcy and your spouse’s credit
If you file individually and have joint debts, your creditors may come after your spouse for the remaining amount of debt—which could be financially devastating for you both, on top of having to file for bankruptcy in the first place. However, if there are no joint debts and you file individually, your spouse’s credit will not be affected.
Property laws in your state
Texas is a community property state, meaning that all assets and debts acquired after marriage are assumed to become your joint responsibility. Bankruptcy trustees and creditors won’t be able to touch your spouse’s individual property (property acquired before the marriage, or which is otherwise exempt from community property rules). However, the property you acquired during the marriage is subject to being sold to repay your creditors, which obviously affects your spouse.
If you discharge your community or joint debts with your spouse through individual bankruptcy, creditors may still be able to come after your spouse—but they’ll have to go after their separate property.
Chapter 13 bankruptcy offers you the opportunity to file along with your spouse, and take advantage of what’s called the “co-debtor stay.” This is a legal protection that prevents creditors from coming after co-debtors during bankruptcy proceedings—as long as you continue to make your payments under the Chapter 13 bankruptcy repayment plan. If you don’t make your payments, the court can lift that stay and your creditors can come after your spouse.
While your debt is your own responsibility, filing with your spouse can do two important things. First, it cuts down on the need to file a second bankruptcy case for your spouse—you’ll file one case and pay one fee. Second, bankruptcy cases come with an automatic stay, so your creditors will stop harassing you and you won’t need to worry about foreclosure for at least a few months.
Depending on the specific circumstances of your case, filing jointly may be the best course of action. Talk to James R. Jones, Attorney at Law to determine how filing bankruptcy while married may affect you in The Woodlands, TX. We look forward to working with you soon.