Can a Married Person File for Bankruptcy Alone
Marriage and Bankruptcy
Bankruptcy is a difficult situation and can get more stressful if you are married as you might worry about how your bankruptcy might impact your partner. It is crucial to understand all your obligations during bankruptcy and the consequences of becoming bankrupt.
You might be wondering how to proceed for bankruptcy when you are married as it might have negative consequences on your spouse or your spouse might be held responsible for some part of the debt. Do you both file for bankruptcy or can you file for bankruptcy alone? How would your bankruptcy affect your spouse? Let’s have a closer look.
Filling as an Individual or as a Couple
During your marriage, you might have kept almost all of your finances separate. Even though you and your spouse might own joint assets, like rental or home property, only you are the one experiencing debt payment issues.
This is a common problem for a couple facing bankruptcy. Fortunately, you can file for bankruptcy as an individual, making your spouse a non-debtor who is considered as the non-filing spouse during the procedure.
Filing For Bankruptcy as an Individual
When you file for bankruptcy as an individual, the personal insolvency only affects you and not your spouse or family. It means filing for bankruptcy would discharge your personal debts only, including store cards, student loans, and credit card debts.
After you file for bankruptcy as an individual, you would be released from most of your debts after three years and one day. Here are the steps you would have to take:
⦁ Include through details of your assets (joint assets as well), your income, and your debts to the trustee that would be appointed to you by AFSA after you declare bankruptcy.
⦁ All your creditors would be notified by your trustee about your bankruptcy, preventing them from contacting you regarding the debt you owe them.
⦁ Your trustee has the authority to sell off your assets to pay for your debts, including your home, vehicles, etc.
⦁ After that, you might have to make compulsory payments based on your income.
Fortunately, when you file for bankruptcy as an individual and not a couple, you take the responsibility yourself. This means that the declaration of your bankruptcy won’t impact the credit rating of your spouse, as well as their income, debts, and personal assets.
However, your non-filing spouse would still have to provide their complete financial details, like their joint assets, joint liabilities, personal assets, and income. This is because they are married to you and their financial details would offer a better financial picture of the marriage. It will also help in determining the compulsory repayments amount.
The only ways in which filing as an individual would affect your non-filing spouse is when and if your spouse:
⦁ Is the debt guarantor
⦁ Has joint liability with you
⦁ Is the joint owner of a property with you
Filing for Bankruptcy as a Married Couple
If you and your spouse are both filing for bankruptcy, then you have to complete all the necessary bankruptcy forms and submit them separately. It is essential to remember that financial details included in one bankruptcy should mirror the ones listed in the other. It is important to consult a bankruptcy professional to ensure the process goes smoothly.
Impact of Becoming Bankrupt on Your Spouse
If you are filing for bankruptcy as an individual, how exactly would it affect your spouse?
Fortunately, the credit rating of your spouse will not be affected but any property that you jointly own would be affected. Your spouse would also not be impacted when it comes to financial responsibilities but there might be certain exceptions.
These exceptions might not directly impact your spouse but might put come hindrance or restrictions in the following areas:
This includes any open joint accounts you both have and any joint loans, like rental lease or home loan in both your names. This would also include investment accounts both of you have in your name jointly or any joint insurance policies that both of your pay the premium for.
When you and your spouse enter any contract jointly, both of you are co-borrowers. This is why your non-filing spouse would also be held responsible legally for the entire amount.
When your spouse applies for a loan or a credit, your bankruptcy won’t preclude them automatically from getting approved. However, it might get difficult for them to get the credit or loan considering you both share the same address and bankruptcy has been filed under the same address.
Going on family holidays might get challenging as you can’t travel abroad after declaring yourself bankrupt. You also can’t go on a holiday without getting your trustee’s written permission. Depending on your unique situation, you may have to give up your passport until your bankruptcy ends, which is three years and one day from the date your bankruptcy gets approved.
It is crucial to consider all your options before you file for bankruptcy when you are married. Gather as much information as you can to ensure that you make the best possible decision based on your circumstances. This is particularly important since your declaration of bankruptcy might have an impact on your spouse in some instances.
While your spouse won’t be held liable or automatically responsible through a bad credit score for your bankruptcy declaration, there might be instances or situations where they might be responsible for some debt. Therefore, getting in touch with a professional bankruptcy expert is important to thoroughly assess your situation and determine the right decision for you and your spouse.
If you have any additional questions on married people filing for bankruptcy alone or bankruptcy and marriage, please don’t hesitate to contact us for a free consultation to discuss your specific situation.
As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.
For Ross, it’s important to see the people behind the financial problem –not just numbers.
Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.
The unit she & her husband live in is not owned by them, but subject to a 20-year lease.
The money to be repaid by the management was due only at sale, when the client finally left the retirement village.
Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.
Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.
The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.
The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.
The moneys paid represented about 75% of what would have been available to creditors if they waited two years.
It is a win for the client and for the creditors.
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