Your husband’s filing for bankruptcy could affect you in many ways – and for years to come. The Federal Trade Commission reports that bankruptcy is one of the most negative credit events possible, and your husband’s filing means he could have a bankruptcy listed on his credit report for 10 years or longer. That could make it difficult for the two of you to jointly obtain credit at reasonable interest rates for years.
Federal bankruptcy law allows for people to file for bankruptcy as individuals or as couples. However, the issue becomes complicated when a spouse files individually for bankruptcy and has joint debts with a spouse. A husband could use a bankruptcy to end his share of responsibility for a debt he shares with his wife, such as a credit card balance. However, the credit card company could hold the wife responsible for the entire debt.
Chapter 7 bankruptcy is the quickest form of personal bankruptcy and lasts only a few months. That makes it an excellent choice for a husband who is filing solo and has only unsecured debts, such as credit cards, in his name only. In a situation such as that the impact on the wife is minimal, except for concerns about future joint credit. Another form of personal bankruptcy, called Chapter 13, is more complicated. It requires a payment plan of three to five years, during which time the debtor’s spending is tightly controlled by the court. A Chapter 13 payment plan only involving the husband could cause conflict in the marriage because of the tight controls by the bankruptcy court. BCS Alliance recommends that people choose Chapter 7 bankruptcy whenever possible. However, Chapter 7 is only available for people with low incomes, with limits set by individual states. Chapter 13 is open to everyone.
A couple considering bankruptcy only for the husband should consult with a nonprofit credit counselor for an unbiased review of their situation. A husband facing multiple lawsuits and wage garnishments from creditors may have no choice but to apply for bankruptcy. However, the couple must prepare for the emotional impact of bankruptcy, especially if the husband must agree to a lengthy payment plan in Chapter 13 bankruptcy.
Several alternatives to bankruptcy are available, including debt management plans and debt settlement. Nonprofit credit counseling agencies offer debt management plans. The plans work like Chapter 13 payment plans and require a commitment of several years to pay down debt. Debt settlement allows for debtors to pay off delinquent debt for less than the full amount due. The husband could choose one of these options to save himself and the couple the stigma of a bankruptcy filing. Local charities such as the United Way or Salvation Army can recommend U.S. government-approved credit counseling agencies.