For some couples, filing for bankruptcy is the best way to get out from under crippling debt. But what if only one spouse caused the debt? Do both spouses have to file for bankruptcy?
The answer depends on a variety of factors. For example, what type of debt are you dealing with? Do you live in a community property state? Do you want to rebuild their credit scores in the future?
Here’s what you should know:
Debt Held by Both Spouses
If you and your spouse have taken out joint loans and credit cards together, then it’s likely that you will need to file for bankruptcy together. This is because when you sign a loan agreement or open up a joint credit card account, you are both legally liable for repayment of that debt. Therefore, if one spouse files for bankruptcy without the other, then the other spouse could still be held responsible for any remaining balance after the first spouse’s discharge.
The best way to avoid this situation is to only apply for joint loans or open joint accounts with your partner if and when you are certain that each of you can afford all of the payments involved—and if one of you eventually files for bankruptcy without the other, then make sure your partner doesn’t also become liable for any debts that are discharged as part of your case.
Community Property States
In certain states, all assets acquired during your marriage are considered “community property.” This means they belong equally to both spouses regardless of who earned them. If both spouses live in one of these states and have significant assets acquired during a marriage, then it may be necessary for both spouses to file jointly to protect those assets from creditors.
Additionally, even if only one spouse has significant debt issues, filing jointly can help reduce overall financial stress since it may allow more assets—especially those acquired through inheritance—to remain untouched by creditors.
Florida is not a community property state. Like the majority of states, it follows equitable distribution rules.
Rebuilding Credit Scores
Lastly, filing jointly allows both partners to rebuild their credit scores faster than if just one had filed individually. This is because joint filings tend to be reported on both parties’ credit reports. This allows them both access to more favorable loan terms in the future once their scores begin improving again.
Of course, this does not mean that couples should rush into filing joint bankruptcy just so they can rebuild their credit quicker. It means that it could potentially be beneficial financially down the road if rebuilding credit is something important to them as well as getting out from underneath overwhelming debt now.
Deciding whether or not both spouses should file bankruptcy requires careful consideration and analysis of each person’s financial circumstances.
Ultimately, it’s best for couples considering bankruptcy together to consult with an experienced attorney before taking any steps forward. This way they understand fully what options are available based on their individual needs and goals.