There are many reasons why a married couple may decide that only one spouse needs to file bankruptcy. The bankruptcy law allows a married person to file an individual bankruptcy but there will be some impact on the non-filing spouse. If you are a non-filing spouse, here are some concerns that you should keep in mind:
1. Your credit score may be negatively impacted. You are most likely to face this problem when you have joint debts with a bankruptcy filing spouse and your spouse does not pay a joint debt on time.
For example, Chapter 13 allows a bankruptcy debtor to restructure payment obligations, which may include reducing the monthly installment, or extending the term of the loan. As a non-filing spouse you will likely be in violation of the contractual terms of your loan, which will appear as a late payment on your credit report.
2 Your joint bank accounts may be at risk. The bankruptcy law does allow a Chapter 7 or Chapter 13 debtor to declare a set amount of cash as exempt (sheltered) property. Depending on the particulars of the case the amount of this exemption can range from zero to around $10,000.
Generally the ownership of a joint account is considered “joint and several” meaning that you and your spouse have a complete interest in the funds. You can claim as your sole property a percentage of the joint bank account but you will need to show what percentage arises from your contribution 1. This can result in tricky accounting problems, especially if there are other bank accounts or if one spouse took responsibility for making specific household payments.
Often it is wise to try to separate your finances from those of your bankruptcy filing spouse but you have to be careful here too as property transfers shortly before bankruptcy can be challenged. Talk to a lawyer before making any transfers and talk to the lawyer early.
3. Your bankruptcy filing spouse will need access to your employment information including your salary. This information will appear on your spouse’s bankruptcy schedules, which are public records (although one would have to know where to look to find this information).
The bankruptcy law assumes that a married couple shares some or all responsibility for household expenses. This presumption can be rebutted but you will need documentation.
4. If you are separated from your spouse and your estranged spouse threatens or actually files bankruptcy, you will want to get legal help. Generally support and maintenance obligations are not dischargeable in bankruptcy but you will want to make sure that your divorce lawyer understands the implications of bankruptcy law prior to signing off on a final order.
5. When one spouse files bankruptcy and the other spouse does not, the bankruptcy filing will put stress on the marriage relationship. Your family lifestyle, including where you live and how you spend your money, may be questioned or impacted. Marital problems can be avoided by minimizing surprises.
Your spouse’s bankruptcy lawyer can offer advice and information to a point – remember that your spouse’s lawyer is representing your spouse and his interests only. If you want a complete picture about how your interests may be impacted you may want to retain your own lawyer.
- See O.C.G.A. Section 7-1-812 and Lamb v. Thalimer Enterprises, Inc., 193 Ga. App. 70, 386 S.E.2d 912 (1989) ↩