Will My Bankruptcy Affect My Spouse’s Credit

Bankruptcy represents a stressful time for couples, but what happens if only one spouse declares bankruptcy? Someone considering bankruptcy in this situation might be worried that their bankruptcy might also affect their spouse's credit.

The lawyers at Checkett, Pauly, Bay & Morgan explain how one spouse might be affected if the other declares bankruptcy.

Personal vs. Shared Debt

When a couple gets married, they automatically assume everything becomes shared, and in many cases that is true. But debt, however, legally, only belongs to the person who borrowed the money under their name. If a couple takes out a loan together, in both of their names, it becomes a shared debt. Or if both spouses open a credit card account with both people listed on the card, then any debt accrued belongs to both.

If a person has a debt from before they are married, or if they take out a loan or open a card only in their name, then their spouse is not legally responsible for that debt.

Credit Reports Can Reveal Shared Debts

One of the quickest ways to see who a debt belongs to is to check the monthly bill statement. In most cases, this should show everyone listed under the account.

If you aren’t sure if a debt is shared by both spouses, another easy way to find out is to pull a credit report. The credit report for each person should show what debts they are personally responsible for and how those debts affect their current credit score. If a debt shows on both spouses' credit reports, it is a shared debt.

Can One Spouse File Bankruptcy?

Yes, even if they are married, a person can file for bankruptcy for their debts. If the debts belong only to one spouse, then that person can file bankruptcy independently.

Will One Spouse's Bankruptcy Affect The Other Spouse?

This is where it is important to understand which debts are shared. Any debts shared between the person who files bankruptcy and their spouse will be affected and can change both credit scores. However, if all the debts under the bankruptcy are personal, it should not alter the spouse's credit. A credible law firm can help you navigate your bankruptcy and ensure it doesn’t affect your spouse’s credit, if possible.

Call Checkett, Pauly, Bay & Morgan in Carthage, MO

The lawyers at Checkett, Pauly, Bay & Morgan can assist you with your bankruptcy and help with any questions you have. Contact us online or by calling (417) 358-4049.

Considering Chapter 7 Bankruptcy Due to COVID-19? What You Need to Know

We’re seeing more and more bankruptcy cases in 2020 due to the coronavirus pandemic. As the economy is still in the midst of a recession, we may see filings continue to increase. Our bankruptcy attorneys understand that filing for Chapter 7 bankruptcy is a tough decision, but it may be a prudent choice based on your situation. Read on as we share information you should know about filing for Chapter 7 bankruptcy due to COVID-19.

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Being Laid Off

Millions of people were laid off once stay-at-home orders happened and the economy shut down. The nationwide unemployment rate is still near 8 percent, at 7.9% (as of October 2020), and 7 percent in Missouri (compared to half that a year ago). If you’re laid off, there are two things you should do. 

First, talk to your creditors about making payment arrangements. Lenders would prefer you keep the loan rather than discharge it through Chapter 7 bankruptcy. Some lenders will waive several months of late payments if you agree to add the payments to the end of the loan. Talk to your lenders to see if this is an option. This will at least delay Chapter 7 bankruptcy until you can find another job.

Second, file for unemployment as soon as possible. Unemployment benefits are exempt from bankruptcy, meaning you won’t lose them when filing for Chapter 7 protection. You can look for another job while receiving unemployment benefits.

Understand the Means Test

The means test in Missouri pertains to filers who have an income above a certain amount. Chapter 7 bankruptcy filers must be below a threshold to file for this protection. If your income is above the threshold, you must file for Chapter 13 bankruptcy, which is where you reorganize your debts and pay them over the course of five years.

For example, you live in a household with three members. You make $70,000 per year, but you’re having trouble paying all of your debts. The median income for a three-member household is $57,468 for the means test. The means test assesses your average income over the past six months versus your expenses. If you have enough income left over to pay some debts through Chapter 13 bankruptcy, you cannot file for Chapter 7 bankruptcy.

Checkett & Pauly can help you determine whether you pass the means test or not for Chapter 7 protection. 

What Can and Cannot Be Discharged

Under Chapter 7 bankruptcy, most of your debts can be discharged. Debts that cannot be discharged include, but are not limited to:

• Alimony and child support

• Unpaid taxes

• Student loans

• Debts arising from a willful and malicious injury, such as having a judgment against you for a personal injury case

Many types of debt can be discharged with Chapter 7, including medical bills, credit card bills, utility bills, car loans, and mortgages. Unfortunately, you may need to turn over some of these assets to pay for certain debts. Talk to Checkett, Pauly, Bay & Morgan, LLC, about what happens during a Chapter 7 bankruptcy filing, and we’ll advise you as to the best course of action based on your unique situation.

Related Post: Bankruptcy Attorney FAQs

Chapter 7 Bankruptcy at Checkett, Pauly, Bay & Morgan, LLC

Every person’s financial situation is different. The experienced bankruptcy attorneys at Checkett, Pauly, Bay & Morgan can discuss your options based on your unique set of circumstances. Contact Checkett, Pauly, Bay & Morgan, LLC or call (417) 358-4049 for more information. The first consultation is always free.