Did you know that married couples have the option to file for bankruptcy together? That's right! It's a joint process that can help alleviate financial stress and provide a fresh start. But what if you want to file for bankruptcy without your spouse? While it's possible, it's highly unlikely that your spouse won't find out. Let's dive deeper into the world of bankruptcy and how it affects spouses.
Firstly, filing for bankruptcy together can have several benefits. It streamlines the process, reduces legal fees, and allows for joint debts to be discharged. Plus, it can provide a sense of unity and support during a difficult time. However, there are also potential challenges to consider. Both spouses' credit scores will be affected, and any assets owned jointly may be at risk of liquidation.
If you're considering filing for bankruptcy without your spouse, it's important to understand that it's not a secret process. Your spouse will likely find out, as they are legally required to be notified. Additionally, if you live in a community property state, your spouse's income and assets may still be considered in the bankruptcy process. It's important to consult with a bankruptcy attorney to fully understand your options and the potential consequences.
Why Would My Spouse Find Out About My Bankruptcy Filing?
Trying to keep your bankruptcy a secret from your spouse is a tough road to take, and here's why. Understanding these reasons can give you insight into bankruptcy and how it affects your relationship with your spouse.
Your Spouse’s Income Is Reported on Your Bankruptcy Filing
When you file for bankruptcy relief, the Bankruptcy Code requires you to report household income, which includes your spouse’s income. As part of the bankruptcy requirements, you must file copies of your pay stubs or other proof of income for the six months before filing bankruptcy. However, obtaining copies of your spouse’s pay stubs may be difficult without their knowledge, especially if they are self-employed.
But here’s the good news: because you count your spouse’s income as part of household income, you count your spouse as part of your household to determine the median income level for the Means Test. Median income is based on the number of people living in your home and the state of your residence. As household size increases, the median income to qualify for Chapter 7 increases.
For example, in California, the median income for one earner is $69,660 as of November 1, 2022. However, a two-person household can have an income as high as $86,271 and still meet the income requirements to qualify for Chapter 7. The government adjusts the bankruptcy median income levels periodically, so make sure to check here for the most current figures.
Additionally, you can deduct some of your spouse's expenses from the budget, such as court-ordered alimony and child support payments, car loans paid for a vehicle that is titled solely in your spouse’s name, mortgage payments for real estate owned solely by the non-filing spouse, and payments to creditors for the spouse’s individual debts. By deducting the non-filing spouse’s individual expenses and debt payments, you lower your disposable income for a Chapter 13 plan payment.
If you want to find out if you qualify for Chapter 7 bankruptcy, you can use our free Chapter 7 calculator below. Just keep in mind that you must report your spouse’s income when completing the Means Tests and the Monthly Income schedule, and file copies of your pay stubs or other proof of income for six months before filing bankruptcy.
Co-Debtors Must Be Listed in Your Bankruptcy Filing
When filing for bankruptcy, it is important to list all co-debtors or co-signers on your bankruptcy forms. Co-debtors are individuals who share equal responsibility for repaying a debt. By law, each co-debtor must receive notice of your bankruptcy filing since they could be held liable for any debts that you do not pay.
If your spouse is a co-debtor on any of your debts, they will receive a Notice of Bankruptcy Filing. This notice includes important information such as the bankruptcy filing date, the chapter of bankruptcy filed, your name and address, the bankruptcy case number, and other relevant details about the case.
It's important to note that intercepting the notice before your spouse sees it is not a good idea. Your bankruptcy case could be listed on your spouse's credit report as a notation on a joint credit account. If your spouse checks their credit report or receives notifications about changes to their credit report, they will discover that you filed for bankruptcy.
One thing to keep in mind is that a spouse's bankruptcy filing can impact a non-spouse's credit score. Although merely noting that you filed for bankruptcy on your spouse's credit report should not affect their score, your spouse is responsible as the co-debtor if the debt is not paid. Therefore, late payments and non-payment could significantly lower their credit score.
Being transparent about your bankruptcy filing with your spouse is crucial. It's best to work together to understand how the filing may impact both of your credit scores. By doing so, you can take the necessary steps to rebuild your credit together.
Joint Assets Could Be an Issue for Bankruptcy and Spouses
When it comes to bankruptcy and spouses trying to conceal a bankruptcy filing, joint assets are a crucial consideration. You must list all assets that you have any interest in at the time of the bankruptcy filing on your bankruptcy forms. However, this doesn't necessarily mean that you lose all your property when filing for bankruptcy.
Federal bankruptcy exemptions safeguard a specific amount of equity in property from being used to pay debts. Many states also have state bankruptcy exemptions that debtors can use to protect assets. For many debtors, bankruptcy exemptions safeguard all assets, so they don't lose any property when filing for bankruptcy relief. However, this isn't true for all debtors.
Use our free Bankruptcy Exemption Calculator below to determine if your property would be at risk if you file a bankruptcy case.
If you have non-exempt equity in assets and file Chapter 13, you can protect the assets by paying a higher monthly amount to the Chapter 13 trustee. Since you keep the assets, your spouse would not find out about your Chapter 13 bankruptcy filing due to joint assets.
However, in a Chapter 7 bankruptcy, the Chapter 7 trustee seizes non-exempt assets and sells them to pay your unsecured creditors. If your spouse owns an interest in the asset, the Chapter 7 trustee pays your spouse for their interest. If the Chapter 7 trustee sells something that your spouse owns, they will know about your bankruptcy case.
Your Take-Home Pay Decreases When You File Chapter 13
When a debtor files for Chapter 13 bankruptcy, the court usually orders the plan payment to be taken out of their paycheck. The court sends an order to the debtor's employer to deduct a specific amount from each pay period and send it to the Chapter 13 trustee. As a result, the debtor's spouse may notice a decrease in their take-home pay, and any outstanding debts, including car loans, are also included in the plan and paid by the trustee.
If a non-filing spouse closely monitors the family's finances, they may become aware of the bankruptcy filing due to the changes in income and expenses. To get an idea of what your plan payment might be in a Chapter 13 case, you can use our free calculator below.
Check out our Chapter 13 bankruptcy calculator to estimate your plan payment.
You Receive Mail from Your Bankruptcy Lawyer and the Bankruptcy Court
Getting mail from the bankruptcy court, trustee, and lawyer is a regular occurrence when you file for bankruptcy. However, keeping this information from your spouse can be a challenge.
Bankruptcy and Spouses - Should I File Bankruptcy Without My Spouse?
Bankruptcy can be a tricky topic when it comes to spouses. It's not uncommon for one partner to be in favor of seeking bankruptcy relief, while the other is hesitant to take that route. However, going ahead and filing for bankruptcy without informing your spouse may not be the best course of action.
There are several reasons why it's important to involve your spouse in the decision-making process. First, bankruptcy can impact both of your credit scores, so it's crucial to have a joint understanding of the potential consequences. Additionally, if you file for bankruptcy without your spouse's knowledge, it could cause trust issues in your relationship.
It's essential to have an open and honest conversation with your spouse about your financial situation and explore all possible options together. While it may be difficult to have this conversation, it can ultimately lead to a stronger relationship and a more successful resolution to your debt problems.
Where Do I Begin if I Want to Get Out of Debt?
Are you struggling with debt and wondering if filing for bankruptcy is the right solution for you? We can help you explore various options for debt relief. Our goal is to educate you on ways to get out of debt and how different debt relief options work. Once you have this information, you can discuss your options with your spouse and make an informed decision.
To get started, try using our free debt relief comparison calculator. This tool can give you an idea of what options may be available to you. Additionally, we can help you locate a bankruptcy lawyer near you who can offer a free consultation. Our debt relief counselors can also help you explore options such as debt consolidation, debt payoff planning, debt management, debt settlement, and filing for Chapter 7 or Chapter 13 bankruptcy.
However, you may find that you can avoid filing for bankruptcy altogether. For example, a debt management company or specialized app may be able to help you create a debt payoff strategy that works for you.