If you are married and planning to file bankruptcy, you will likely have concerns about whether or not your spouse will be affected. As a bankruptcy lawyer might explain to you, it is possible to file bankruptcy as an individual, but your spouse could suffer. Whether or not this is true will depend on circumstances like:
- Whether you have joint property
- Whether you have joint debt
- The property laws
- The asset laws
- The type of bankruptcy you are filing for
If you would like to know more about how bankruptcy can affect the credit score, and overall, financial livelihood of your spouse, you should consult a bankruptcy lawyer.
How the Credit Report May Be Affected
Bankruptcy is listed in two areas on a credit report. In the tradelines of the account and in the public records.
Understanding the Tradeline Area on a Credit Report
This area includes the details of every line of credit you have obtained in the last 2 to 10 years (depending on the state). The tradeline area includes information such as:
- The creditor’s name
- The history of payment
- The status of the account or debt
There will also be statements that read:
- Charged Off
- Sent to Collections
- Included in Bankruptcy
The Public Records Area
This area on a credit report will detail tax liens, bankruptcies, and judgments. In the public records area, only the name of the person who files for bankruptcy will be displayed. It is not possible for a married couple to share a credit report. If you are married and file for bankruptcy, your spouses’ credit report will not show the bankruptcy.
As a bankruptcy lawyer might explain to you, as soon as you have filed for bankruptcy, the status of any open lines of credit will likely read “Included in Bankruptcy”. Should any of these lines of credit be jointly connected with your spouse (or another person), their report tradeline will not read this.
That being said, the joint account holder is responsible for paying off the debt. The person who filed for bankruptcy can typically have the debt discharged. Creditors cannot come after them once the bankruptcy has been filed. For this reason, it is common for lenders to persist individuals in having a cosigner. This person will be responsible for paying off the debt even if the main borrower chooses to file for bankruptcy.
There are two primary types of bankruptcy: Chapter 7 and Chapter 13. Which is right for you largely depends on your financial circumstances. If you have concerns about how bankruptcy might affect your spouse and his or her credit, it may be a good idea to speak with a bankruptcy lawyer.
A lawyer can review your situation and help you to understand what will happen to your debt and also your spouses. It is worth your time to ask your lawyer, like a Bankruptcy Law Firm Memphis, TN, about Codebtor Stay. This is an option available through Chapter 13 and prohibits creditors from coming after your spouse once you file. There are terms attached, and these can be explained by a bankruptcy lawyer.
Thank you to the experts at Darrell Castle & Associates for their input into bankruptcy law.