Spouse in Bankruptcy: Can My Bankruptcy Affect My Spouse?

How bankruptcy affects a spouse is one of the most common questions asked. Below we explain the rules regulating position of a spouse in bankruptcy.

Many people assume that marriage means the spouse is automatically responsible for debts, but this is not true. Most of the time, it is the debtor alone that is responsible for his/her debts and so, in case of a bankruptcy, the spouse of the bankrupt person is not held responsible for the debts that are not his/her debts and for which he/she did not co-signed or guaranteed them; and even though collection agencies will sometimes tell debtors that if they miss payments, they’ll go after their spouse for the money - that is not true, it's only a scare tactic. Again, a bill collector can only go after the spouse if he/she has co-signed or guaranteed the debt.

One situation where spouse could be responsible for a debt and where, consequently, bankruptcy could affect the spouse, is with supplementary credit cards. Even if the spouse did not sign the card application form, if they have their name on it, and if they’ve used it, they are responsible for the whole debt.

Bankruptcy could also have an indirect impact on a spouse in the way that the bankrupt spouse may not qualify as a co-signor in the future.

In the case of a divorce, matrimonial property is divided evenly between both individuals. For example, if a pair owns a house worth $200,000 dollars, each will get $100,000. However, if the pair have any debts together, and get divorced, they will both be responsible for the entire debt. In addition, even if in the separation agreement, the divorcees have opted to each take care of half the debt, if one of the two does not pay their share, the creditor could go after the other for the whole amount.

If you or your spouse are considering bankruptcy and are wondering about what would be the position of your spouse in the bankruptcy, would it affect the spouse in any way, please contact us immediately. Your situation will only get worse the longer you wait. Our bankruptcy trustees offer initial consultations free of charge, to asses your financial situation and discuss your options.