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Information on Drawbacks of Fiance Filing for Bankruptcy - The Bills.com Blog
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Information on Drawbacks of Fiance Filing for Bankruptcy
Thursday, Oct 30, 2008
Question: I have two questions actually. First, what would be the drawback to getting married to someone that is planning to file bankruptcy? His debt is really high, and someone recommended to him to file bankruptcy in order to wipe out all his debt. How will this impact the spouse? Second, I have an interest only loan that is due to change in 2010. What are my chances in this crazy market to refinance? My current rate is 5.50 percent. I realize that I probably will not get a rate that good right now, but what do you recommend that I do now to prepare myself?
Answer: While your future spouse’s bankruptcy filing will definitely have a negative impact on his credit rating, it should have no effect on you, either from a credit or from a legal standpoint. Neither his delinquent debt nor his bankruptcy filing would show up on your credit report. Credit reporting agencies search through public records to find bankruptcy filings, which they then place on the consumer’s credit file; since your name will not be included as a petitioner on your future spouse’s bankruptcy, the case will not appear on your credit reports. In addition, you have no legal liability for his debts, since the accounts are in your fiancé’s name only, and since you did not sign a credit contract or other agreement obligating you to pay the debt. Even in a community property state, in which debts incurred by one spouse can be the legal obligation of both spouses, debts incurred prior to the marriage by one spouse is not considered community debt, and therefore should have no direct impact on the non-debtor spouse. The bottom line in this situation is that I see no way that your fiancé’s debt or bankruptcy would negatively impact your credit ratings or cause you and legal problems. If you would like to learn more about bankruptcy, you can visit http://www.bills.com/bankruptcy/.The only potential problem I can imagine that your future spouse’s bankruptcy filing could have is that
you and he may not be able to obtain any loans or other credit together for the next few years, as filing for bankruptcy protection will likely reduce his credit rating substantially. Therefore, any credit which either of you need, such as an auto loan, a private education loan, etc., would probably need to be taken out in your name alone. While this situation should not cause you any major problems, it could make obtaining credit more difficult, especially if your credit history is less than perfect. The bankruptcy filing should fall off of your fiancé’s credit report after ten years, so his bankruptcy will not cause him any permanent problems in regard to obtaining credit. To read more about credit, credit reports, and credit scoring, I encourage you to visit the Bills.com Credit Resources page at http://www.bills.com/credit/.
In regard to your question about obtaining a refinance loan, I will be honest in telling you that, unless you have an impeccable credit history and high credit score, you will probably struggle to find an affordable refinance loan under current market conditions. Various economic pressures, including skyrocketing foreclosure rates and falling home prices, have caused credit markets to freeze up worldwide and forced banks to stop lending at previous levels. The result for consumers is that it has become increasingly difficult to obtain credit, including a mortgage or refinance loan. Interest rates are still relatively low for those who can obtain mortgages; the average interest rate on a thirty year fixed-rate loan right now is 5.87%, only slightly higher than what you are currently
In regard to your question about obtaining a refinance loan, I will be honest in telling you that, unless you have an impeccable credit history and high credit score, you will probably struggle to find an affordable refinance loan under current market conditions. Various economic pressures, including skyrocketing foreclosure rates and falling home prices, have caused credit markets to freeze up worldwide and forced banks to stop lending at previous levels. The result for consumers is that it has become increasingly difficult to obtain credit, including a mortgage or refinance loan. Interest rates are still relatively low for those who can obtain mortgages; the average interest rate on a thirty year fixed-rate loan right now is 5.87%, only slightly higher than what you are currently
paying. Unfortunately, only consumers with excellent credit ratings and large down payments can qualify for mortgage and refinance loans due to increasingly stringent underwriting standards being used by lenders.
Despite current market conditions, I encourage you to contact various lenders to discuss the various loan options currently available to you. Even if you cannot find a suitable loan now, you have more than a year before your current loan payments increase, so you may simply need to wait for a few months and hope that the condition of the credit markets improves. If you have any credit problems, you should work to improve your credit score while you are waiting for the lending environment to improve; the better your credit rating, the more likely you will be to secure a loan and the lower your interest rates will be. Waiting a few months or longer will also give you time to save up for a down payment on your new loan; having a sizeable down payment is especially important if you do not have substantial equity in your home, as most lenders are hesitant to provide borrowers with 100% financing on any mortgage or refinance loan. To learn more about refinance loans, you can visit the Bills.com home refinance page. In addition, if you submit your contact information in the Bills.com Savings Center, https://www.bills.com/homeloan/mortgage_refinance/, we can have several lenders contact you to discuss the refinance options available to you.
I wish you and your fiancé the best of luck for the future. I hope that the information I have provided answers your questions and helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Despite current market conditions, I encourage you to contact various lenders to discuss the various loan options currently available to you. Even if you cannot find a suitable loan now, you have more than a year before your current loan payments increase, so you may simply need to wait for a few months and hope that the condition of the credit markets improves. If you have any credit problems, you should work to improve your credit score while you are waiting for the lending environment to improve; the better your credit rating, the more likely you will be to secure a loan and the lower your interest rates will be. Waiting a few months or longer will also give you time to save up for a down payment on your new loan; having a sizeable down payment is especially important if you do not have substantial equity in your home, as most lenders are hesitant to provide borrowers with 100% financing on any mortgage or refinance loan. To learn more about refinance loans, you can visit the Bills.com home refinance page. In addition, if you submit your contact information in the Bills.com Savings Center, https://www.bills.com/homeloan/mortgage_refinance/, we can have several lenders contact you to discuss the refinance options available to you.
I wish you and your fiancé the best of luck for the future. I hope that the information I have provided answers your questions and helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
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