Whether you have a husband, wife, partner, spouse, girlfriend, or boyfriend, we always recommend sharing your financial situation and facing it together. This doesn’t mean that your partner has to be directly involved in whatever course of action that you choose to pursue, but it should mean that they are aware of it and supportive of your desire to be debt free. Deciding to address your individual financial situation is for the betterment of your shared financial future.
Bankruptcy can be declared by you and/or your partner individually, or jointly. For the purposes of this blog post we’ll be discussing the affect of you declaring bankruptcy on your partner. For more information on declaring bankruptcy together, or jointly, click here.
If you and your partner obtained credit together by accepting joint responsibility for the debt, then the creditor may request immediate repayment from your spouse in the event that you declare bankruptcy. For example, John and Linda married 5 years ago and obtained a credit card with a $10,000 credit limit shortly after their marriage. At the time of John’s bankruptcy last week, the credit card had a balance of $8,000. Shortly after the credit card company received notice of John’s bankruptcy, they demanded payment in full from Linda. While John’s responsibility for the debt is completely erased by his bankruptcy, Linda is now responsible for the entire credit card balance of $8,000; not only her half.
This doesn’t always happen. Some creditors would allow Linda to continue to possess the credit card with its $10,000 limit on her own while others would demand payment in full and close the account. This is one of the reasons that partners of bankrupts sometimes consider declaring bankruptcy as well.
After you declare bankruptcy, your Trustee will request proof of your partner’s income to determine the amount of surplus income that you owe to your creditors (read more about Surplus Income). Your partner can refuse to share this information, but it will reduce the size of your household and may in turn increase the amount of surplus that you are required to pay.
Declaring bankruptcy has no affect on your partner’s credit rating or history. For more information on how declaring bankruptcy will affect your credit rating, click here.
If you declare bankruptcy and your partner has guaranteed your debt then your creditor may attempt to enforce that guarantee and attempt to collect any outstanding balance from your partner.
If you declare bankruptcy, it will affect what you own yourself as well as those assets that you and your partner own together. For example, if you own half of a $10,000 fishing boat with your partner and you decide to go bankrupt then you have two options:
1) Surrender the fishing boat to your Trustee who will sell it and return $5,000 to your partner; or
2) You and your partner can keep the fishing boat if you or your partner pay $5,000 (the bankrupt’s individual share of the boat) to the Trustee.
Welker and Company encourages individuals to bring their partner to every initial consultation so that the Trustee can understand the entire family’s financial situation and provide expert advice to both of you. We find that everyone leaves feeling informed and relieved and that making the important decision of whether or not to file for bankruptcy is made easier when done together.
For more information, or to have your financial situation reviewed by a licensed Trustee in Bankruptcy send us an email or give us a call. You’ve got nothing to lose except your debt!