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Joint spousal debts & bankruptcy
Tuesday, Jun 23, 2009
Question: My husband and I took out a joint loan and my husband has now gone bankrupt. I need to know where I stand with regards to the debt.
Answer: Generally speaking, if you and your spouse both sign a debt agreement both of you are jointly liable to the creditor. But before I talk more about joint liability and bankruptcy law, let me step back and look at the phrasing in your message.Some people use the term "gone bankrupt" to mean that they have little or no money and a crushing amount of debt they can't hope to repay in a reasonable time. If that's what you mean, your spouse may not need to file for bankruptcy. Your spouse may have two alternatives: Debt consolidation, and debt negotiation and settlement.
Debt negotiation and settlement is the process of negotiating with your creditors to either establish a new payment schedule at a reduced interest rate, or a lump sum payment that’s significantly lower than the total balance. If your only other option is bankruptcy, your creditors may be willing to negotiate with you to ensure that they get something rather than nothing. Read Debt Negotiation and Settlement Advice to learn more about debt negotiation and settlement.
Debt consolidation, by contrast, is consolidating your bills to reduce high interest rates and pay off delinquent payments with a loan or low interest credit card. You are not reducing your debt. You’re simply rolling over your debt into a loan or credit card that has a lower interest rate. It will ultimately
save you money in the long run but in the beginning, you’re still stuck with the same amount. Read How to Consolidate All Bills to learn more about debt consolidation.
Now let's turn to bankruptcy. Let's assume your spouse filed for protection under chapter 7 or 13 of the federal bankruptcy code. That filing may not have any effect, positive or negative, on the non-filing spouse. The filing of one spouse does not give the other spouse protection of the "automatic stay" (blocking creditors from collection) or the bankruptcy discharge. Similarly, one spouse filing bankruptcy will not have an effect on the other spouse's credit report, if there are no joint debts. If there are joint debts, you can expect the bankruptcy to be noted in some way on the credit record of the non-filing spouse.
If both spouses are jointly liable to a creditor, the bankruptcy of one does not relieve the other of paying the debt. Upon a bankruptcy, the creditor may look to the other spouse for payment, unless the bankruptcy case is under Chapter 13. If the debt is a consumer debt to be paid 100 percent through the Chapter 13 plan,
Now let's turn to bankruptcy. Let's assume your spouse filed for protection under chapter 7 or 13 of the federal bankruptcy code. That filing may not have any effect, positive or negative, on the non-filing spouse. The filing of one spouse does not give the other spouse protection of the "automatic stay" (blocking creditors from collection) or the bankruptcy discharge. Similarly, one spouse filing bankruptcy will not have an effect on the other spouse's credit report, if there are no joint debts. If there are joint debts, you can expect the bankruptcy to be noted in some way on the credit record of the non-filing spouse.
If both spouses are jointly liable to a creditor, the bankruptcy of one does not relieve the other of paying the debt. Upon a bankruptcy, the creditor may look to the other spouse for payment, unless the bankruptcy case is under Chapter 13. If the debt is a consumer debt to be paid 100 percent through the Chapter 13 plan,
the co-debtor is protected by the co-debtor stay.
There may be good news for you if your spouse filed for bankruptcy in a community property state -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin. When one spouse files bankruptcy in a community property state, the marital community enjoys the protection of the filing spouse's bankruptcy discharge.
I encourage you to consult with an attorney to discuss the possible ramifications for both you and your spouse. There may be relevant facts that you didn't mention in your message that will affect your rights and obligations. Bankruptcy laws and courts are federal, but community property and family law vary from state to state. It is important to discuss your situation with a legal professional familiar with your states' marital property laws.
In the meantime, review the Bills.com bankruptcy help page to learn more about this procedure, what it can do for you, and which debts can't be discharged in a bankruptcy.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
There may be good news for you if your spouse filed for bankruptcy in a community property state -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin. When one spouse files bankruptcy in a community property state, the marital community enjoys the protection of the filing spouse's bankruptcy discharge.
I encourage you to consult with an attorney to discuss the possible ramifications for both you and your spouse. There may be relevant facts that you didn't mention in your message that will affect your rights and obligations. Bankruptcy laws and courts are federal, but community property and family law vary from state to state. It is important to discuss your situation with a legal professional familiar with your states' marital property laws.
In the meantime, review the Bills.com bankruptcy help page to learn more about this procedure, what it can do for you, and which debts can't be discharged in a bankruptcy.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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