If you are thinking about entering into bankruptcy and are married, you may be concerned about how bankruptcy will impact you and your spouse. You share some assets, but will all of your and your spouse’s assets be a part of the bankruptcy?
The good news is that federal bankruptcy laws are designed to help protect your spouse’s assets so that they don’t have to lose their assets just because their spouse does.
This is particularly important when you look at your tax return. Being able to show how much of a refund each party should be getting could help separate them and prevent your spouse from losing theirs. Usually, that means that 50% of the refund will go to your spouse even if you’re going bankrupt.
Bankruptcy laws protect your spouse
Bankruptcy laws do protect your spouse. Any of the assets or income your non-debtor spouse has may be protected against your bankruptcy. This might include property in their name, inheritances or other assets owned prior to marriage.
Should you go into bankruptcy together?
It’s usually a good idea to limit who goes into bankruptcy, especially if doing so gives you more financial options in the future. For example, if wiping out your debts is all that’s necessary to get your finances back on track, then you don’t need to involve your spouse. Their credit will remain untouched by your bankruptcy, which may help if you had both planned to purchase property or to take out credit in the future.
Bankruptcy doesn’t have to affect both married partners
While your non-debtor spouse might choose to get involved with the bankruptcy, they don’t have to. They have helpful protections that may prevent them from having their credit impacted or from suffering consequences from previous financial decisions that you made.
Bankruptcy may be the right choice for you
This bankruptcy could be the right option for you, and you may be able to complete it without impacting your spouse’s assets negatively. This is something to consider as you look at your financial options and determine if going into bankruptcy would be the right choice for you.