Can a Spouse File Chapter 7 Bankruptcy Alone?
Filing a Chapter 7 bankruptcy is a major financial decision, and whether you file with your spouse or not, he will be affected by your decision. The law allows you to file Chapter 7 either as a couple or individually, but the status of your debts and assets should be the guiding factor in deciding how you file your bankruptcy.
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Debt Ownership
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Generally speaking, any debts you incurred before you got married are your responsibility. If you stop making payments on these debts, creditors cannot go after your spouse for payment. Additionally, in most states your spouse will not be jointly liable for your debts even after marriage as long as the debt is incurred in your name only. In a situation like this, filing Chapter 7 bankruptcy without your spouse may make more sense, as you stand to eliminate your debts without impacting the credit history of your spouse. However, if your spouse is listed as a joint party to any of your debts, he may still be responsible to your creditors even if you receive an individual bankruptcy discharge.
Community Property Considerations
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In community property states, both spouses are generally considered liable for any debts incurred after marriage, even if the debt was incurred in one name only. For community debt, filing Chapter 7 bankruptcy in one name only is usually not enough to protect the marital estate from liability. In other words, if you live in a community property state and receive a bankruptcy discharge as an individual, your spouse is most likely still legally liable for the debt, making your discharge effectively worthless. The nine community property states are California, Arizona, Nevada, Colorado, Louisiana, Washington, Texas, Idaho and New Mexico.
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Eligibility
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Regardless of whether it makes financial sense, if your spouse declared bankruptcy recently, he may not be eligible to file bankruptcy again. If you are filing a Chapter 7 bankruptcy, your spouse cannot file jointly if he filed a Chapter 7 bankruptcy of his own in the last eight years. He is similarly ineligible if he filed a Chapter 13 bankruptcy within the past six years and paid creditors less than 70 percent of the balance owed.
Ramifications
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Filing Chapter 7 bankruptcy will generally cause a dramatic drop in your credit score. With a low credit score, you may find lenders unwilling to extend credit for such things as car or home loans and credit cards. If you do obtain a loan, it will typically be at a very high interest rate. A bad credit history may also make it more difficult for you to find a good job or rent an apartment. If you can keep your spouse out of your bankruptcy petition, he can avoid damage to his credit score. This may provide you with a lifeline for future credit.
Considerations
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If you own a lot of valuable assets such as a home, expensive car or extensive home furnishings, you may consider whether to file a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy. A Chapter 13 bankruptcy allows you to keep your assets in exchange for paying creditors a certain amount of the debt you owe. If you file Chapter 7 bankruptcy, all of your assets above a certain valuation will be sold in order to satisfy creditors.
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