My Wife Went Bankrupt: How Does That Affect Me?
If your wife files for bankruptcy, how it affects you depends on many factors. How your property is titled, whether or not you live in a community property state, and whether or not you share joint responsibility for debts all play a role in the effect of your wife's bankruptcy. In some cases, it may make more sense for you to file jointly rather than letting your wife file alone.
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Joint Debt
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The most negative effect you will feel if your wife files bankruptcy is if you share the responsibility for joint debt. A joint debt can be a credit card or any other type of loan taken out in both of your names. If you and your wife have such a joint debt, you will not be protected if your wife files bankruptcy. Her creditors have the legal right to pursue you for repayment of the full debt, even if she is entitled to a bankruptcy discharge. If you live in a community property state, you may share the same responsibility even if your name is not on the debt. Community property laws state that both spouses are typically responsible for debt incurred after marriage, even if that debt is in just one person's name. As of the time of publication, the states using community property laws were California, Arizona, Washington, Idaho, New Mexico, Louisiana, Wisconsin, Nevada and Texas.
Single-Name Debts
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You can usually avoid responsibility for your wife's debts in bankruptcy if you live in one of the 41 common-law states and if her debts were incurred in her name only. For example, if you live in Kentucky and your wife runs up credit card debt on a card that only she applied for, only she will be responsible for those debts in bankruptcy. You can also avoid responsibility in a community property state if your wife incurred those debts before marriage.
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Joint Property
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While you may not end up sharing the responsibility for your wife's debts, you may still feel the effect of her bankruptcy with your personal belongings. In a Chapter 7 bankruptcy, the court may have the right to liquidate some of your wife's property to help pay down her debts. While property held only in your name should remain unreachable, any joint property you own is fair game for the bankruptcy court. For example, if you share title to a home, license to a car or any joint possessions such as furniture or collectibles, the court may be able to liquidate that property. If you live in a community property state, the law generally sees all of your property as joint property, meaning even assets kept in your single name may be available for court seizure.
Credit
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Even in a community property state, your wife's bankruptcy filing should have no effect on your credit. A credit report is meant to be a reflection of an individual's credit history, so even if you are married, your wife's bankruptcy should not appear on your report. If you have joint debts, those debts should appear in your report, so in that case, your wife's filing can damage your credit when those accounts become listed as included in a bankruptcy petition.
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