How Does Bankruptcy Affect An Unnamed Spouse?

Published on August 9, 2020 by J. Andrew Meyer

How Does Bankruptcy Affect An Unnamed Spouse?

Married couples who are experiencing financial difficulty often wonder how one spouse filing for bankruptcy will affect the other. While married couples can file for bankruptcy jointly, it is also possible for one spouse to file and for the other to remain uninvolved in the proceedings. Generally speaking, the decision of one spouse to file for bankruptcy individually will have little or no effect on the unnamed spouse. Still, it is important to consider how individually filing for bankruptcy may potentially affect the other spouse. There are a variety of factors that should be considered before a married spouse files for bankruptcy on their own. Here’s more on those factors and what you could do if you are contemplating bankruptcy.

Jointly Held Property

Except for property that has been labeled as exempt in the bankruptcy code, any property that is jointly held by the married couple may become part of the bankruptcy estate and could be subject to sale by the bankruptcy trustee. Some examples of possible non-exempt jointly held property include real estate and financial assets such as stocks and bonds. Typically, real estate that constitutes the primary residence is excluded from the bankruptcy estate even if jointly held. It should be noted that the bankruptcy trustee is able to undo the transfer of jointly held property if it has been done within a certain time period. Put more simply, transferring jointly held property to one of the spouses may not successfully shield that property from being subject to inclusion in the bankruptcy estate.

Credit Scores

Generally speaking, if one spouse files for bankruptcy individually, the unnamed spouse’s credit score will not be affected by the bankruptcy filing. However, if the married couple has jointly held debts that are included in the bankruptcy filing, it may show up on the unnamed spouse’s credit report. Additionally, any debt that has been co-signed by the unnamed spouse and which is discharged through the other spouse’s bankruptcy filing does not alleviate the unnamed spouse’s liability for that debt. In other words, creditors can still pursue the unnamed spouse for debt that is discharged in the other spouse’s bankruptcy proceeding.

Household Income

When filing Chapter 7 bankruptcy, the court may look at the overall household income to determine if the spouse qualifies for that type of bankruptcy. In those instances, the court may look at the unnamed spouse’s income to determine the total household income. If the household income is determined to be too high for Chapter 7, the trustee may convert the bankruptcy to Chapter 13, which may require monthly payments to creditors for up to 7 years.

Florida Bankruptcy Attorneys

Filing for bankruptcy is not something to take lightly. With many options on how to file and what type to pursue, it is recommended that you consult with an experienced bankruptcy attorney if you or your spouse are considering filing for bankruptcy individually or jointly. The Bankruptcy Team, PLLC is dedicated to assisting clients resolve financial dilemmas through bankruptcy, foreclosure or other legal avenues so that they can get the fresh start that they are entitled to. If you are contemplating filing for bankruptcy, modifying your mortgage, or are facing unmanageable credit card or student loan debt, we are here for you. Our experienced attorneys will thoroughly review your situation and advise you about meaningful solutions. To consult with The Bankruptcy Team, PLLC, call or contact us today.

J. Andrew Meyer

Andrew Meyer was born in Deland, Florida, in 1970. He graduated with an International Baccalaureate Degree from St. Petersburg High School in 1988, and attended the University of Florida, graduating in 1991 with a degree in Economics awarded with High Honors. Mr. Meyer also attended law school at the University of Florida, receiving his juris doctorate degree in 1995. While at the University of Florida, Mr. Meyer was inducted into Florida Blue Key and Phi Beta Kappa. Mr. Meyer was first trained as a lawyer by Richard T. Earle, Jr., and thereafter worked at the Attorney General's Office for the State of Florida in the Bureau of Criminal Appeals before becoming a senior staff attorney for the Florida Second District Court of Appeal. Mr. Meyer also served as a law clerk to the Honorable Chris W. Altenbernd, Retired, at the Second District Court of Appeal. Following his time at the Second DCA, Mr. Meyer worked at Carlton Fields, focusing his practice on appellate matters. In 2004, Mr. Meyer became an advocate for consumers as a partner at James Hoyer, and then later moved to Morgan & Morgan's class action department in 2009.

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How Does Bankruptcy Affect An Unnamed Spouse?