In most cases, a married couple decides to file for bankruptcy together. However, there are instances where one spouse carries more premarital debts; therefore, it makes sense for only him or her to file.
If this situation sounds like your own, you may wonder how your filing for bankruptcy would affect your spouse’s credit and income. Even if you file for a separate bankruptcy, it can affect your spouse. How debts are treated during bankruptcy depends on when they were acquired.
Washington is a Community Property State
The laws of a couple’s state determine how bankruptcy affects one spouse when the other files. Community property states, like Washington, consider all debts and assets acquired during the marriage to be something that are equally owned by each spouse.
How Community Property Laws Affect Your Spouse and Your Bankruptcy
Unless you and your spouse have agreed formally otherwise, all property and debts you acquire during the marriage will be shared jointly – even if only one of your names is on the debt or asset.
Therefore, all your community property is subject to the bankruptcy, regardless of who is filing. More of your marital property is at risk in a community property state. So, your filing would negatively impact your spouse.
Before filing, you and your bankruptcy attorney must explore your options and see if you have enough exemptions to preserve property. If you are unable to exempt all community property when filing for bankruptcy, it may be better to jointly file for bankruptcy so that you may double your exemptions.
While separate, non-marital property is not subject to your bankruptcy, the court may require that you disclose it anyway.
Benefits to the Non-Filing Spouse
While there are some negatives for your spouse when filing in a community property state, there are some positives to your case. First, you will receive a discharge on your credit report. All community property that is owned by your spouse cannot be sought by creditors after discharge. This is referred to as a phantom discharge. The discharge, however, only lasts for as long as you both are alive and married. If you were to divorce, circumstances could change.
Are You Considering Filing without Your Spouse? Contact a Bankruptcy Attorney First
While there are negatives and positives, not all bankruptcy situations are the same. In some cases, it may be beneficial to file on your own, because you have excess premarital debts. Instead of guessing which type of bankruptcy works best for you, contact a bankruptcy attorney to explore your options.
The team at Hames, Anderson, Whitlow & O’Leary, P.S. have experience with marital and non-marital bankruptcy cases. We can help you assess your options, and determine the financial and credit impacts your filing may have on your non-filing spouse.
To get started, schedule a consultation with a bankruptcy attorney at 509-586-7797 or request more information about bankruptcy online.