Is Your Spouse Considering Wilmington Bankruptcy? Here’s How You’ll Be Impacted

Is Wilmington bankruptcy something you should do together?

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Finances are often one of the biggest sources of stress in a marriage. By the same token, getting out of debt may alleviate tension and help save your relationship if it’s on the rocks. If the majority of the problem debt in your marriage is in the name of just one spouse, filing individual bankruptcy rather than joint Wilmington bankruptcy as a couple might be wiser. But the bankruptcy of one spouse usually affects the other.

When Can You File Bankruptcy Separate from Your Spouse? 

In any case, you can choose to file Wilmington bankruptcy apart from your spouse. It’s only joint bankruptcy that requires consent. Of course, if you want your marriage to stay civil, you probably don’t want to make a decision this serious without consulting and involving your spouse, but in the end, it’s up to you. If the bills and debts are in both your names, the consequences on your spouse will be dire.

What Happens to Joint Debt in Individual Bankruptcy? 

When there are two responsible parties attached to a debt and one files bankruptcy, the other party can be left owing the debt alone. For instance, if you file Chapter 7 bankruptcy and have the balance on a car loan for a repossessed auto discharged but your spouse was also on the loan, the lender can pursue your spouse for the balance owed.

However, if you file Chapter 13 for your Wilmington bankruptcy and get on a repayment plan, your spouse should be safe from collections for the duration of your bankruptcy which lasts three to five years. However, for any balances discharged at the end of the bankruptcy also associated with your spouse, the creditor might pursue collections against your spouse.

Will Your Spouse Filing Bankruptcy Lower Your Credit Score? 

Just by filing Chapter 7 bankruptcy, the non-filing spouse’s credit score will not automatically drop. If there are no joint obligations, the bankruptcy should never affect the non-filing spouse’s credit score. However, if there are any joint debts, the only way to keep the non-filing spouse’s credit score from dropping is to pay the debt. Bankruptcy only shields the filer from the debt.

With Chapter 13 as your Wilmington bankruptcy option, both of your credit scores will be impacted because the public filing will reflect on both your credit reports. However, if only one of you files Chapter 13, the others report should be shielded. The exception is the same as Chapter 7 if you have joint debts. If your partner files and you can’t assume the payments, you’ll take a hit.

What Happens with Assets When Only One Spouse Files Bankruptcy? 

The jointly owned property will be affected by one partner filing bankruptcy. For instance, if you have a car that is owned (not financed) and is worth $10k and in both your names, half of that equity would fairly be considered as part of your spouse’s bankruptcy asset when they file bankruptcy without you. But if you own the $10k vehicle in your name only and your spouse files, you should be fine.

What is not okay is for one spouse to sign over assets to the non-filing spouse just before they file Wilmington bankruptcy. That’s a no-no and can be considered a fraudulent transfer. In fact, giving or signing over assets to anyone, spouse or not, can trigger an accusation of fraud from the bankruptcy court. Selling something at market value is okay, but giving or selling at less than fair market value is suspect.

Is Filing Individual or Joint Bankruptcy Better?

Every Wilmington bankruptcy case is different, just as every financial circumstance is different. The best approach is to schedule a free bankruptcy consultation and bring in your financial information for an honest conversation with a bankruptcy expert about your money problems, debt, and your financial goals for the future. You’ll get advice, and then you can make an informed decision that’s best for you.

To find out more about the benefits of bankruptcy and advantages and disadvantages of filing individual versus jointly, contact the Law Offices of John T. Orcutt. Call +1-833-627-0115 now to schedule a free Wilmington bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.