Can One Person in a Marriage File Bankruptcy?

Bankruptcy offers a legal pathway for individuals to gain relief from overwhelming debt. This federal process provides a structured approach, allowing debtors to either discharge certain debts or reorganize their financial obligations under court supervision. The primary aim of bankruptcy is to give an honest debtor a “fresh start” when they are unable to repay what they owe. This legal framework is designed to address severe financial distress, preventing creditors from pursuing collection actions once a petition is filed. It serves as a formal mechanism to address financial challenges that can affect anyone, including those within a marriage.

Eligibility for Individual Filing

One spouse can file for bankruptcy independently, even while married. Eligibility requires residence in the filing district for most of the 180 days prior to filing.

Before filing, all individual debtors are required to complete credit counseling from an approved agency within 180 days prior to their petition. This counseling explores alternatives and provides financial management guidance. A debtor education course must also be completed before debts can be discharged.

Eligibility depends on the type of bankruptcy sought, primarily Chapter 7 or Chapter 13. Chapter 7, or liquidation bankruptcy, is for those with lower incomes who pass a “means test.” This test evaluates income against state median levels and debt repayment ability. If income is too high or the means test is failed, Chapter 7 may not be an option, and the case might be dismissed or converted to Chapter 13.

Chapter 13, or reorganization bankruptcy, is for individuals with regular income, allowing a repayment plan over three to five years. Chapter 13 does not have a means test like Chapter 7, and allows debtors to keep all property while making payments. When one spouse files, the court considers the household’s total income and expenses to determine eligibility and repayment plan feasibility, even if the non-filing spouse’s income is not directly subject to bankruptcy.

Impact on the Non-Filing Spouse

When one spouse files for bankruptcy, the direct impact on the non-filing spouse’s credit score is limited. The bankruptcy filing appears on the filing spouse’s credit report, but not on the non-filing spouse’s, unless they were also a party to the discharged debts. Indirect effects can arise, particularly concerning shared financial obligations.

Co-signed or joint debts are a significant consideration. If the non-filing spouse co-signed a loan (e.g., car loan, mortgage, credit card), their liability for that debt remains even after the filing spouse’s bankruptcy discharge. Creditors can pursue the non-filing spouse for the full amount of these jointly held obligations. The non-filing spouse becomes solely responsible for repaying such debts, which can strain their financial resources and credit.

The legal framework of marital property influences the non-filing spouse’s situation. States are categorized as either community property or separate property jurisdictions. In community property states, assets acquired during marriage are considered jointly owned by both spouses, regardless of whose name is on the title, with exceptions like inheritances or gifts. In separate property states, ownership is determined by whose name is on the title or who incurred the debt. This distinction dictates how shared assets and debts are treated in an individual bankruptcy filing.

Treatment of Marital Assets and Debts

Handling marital assets and debts in an individual bankruptcy depends on property classification and debt type. Marital property is categorized into separate and community property. Separate property includes assets owned before marriage, and gifts or inheritances received individually during marriage. Community property, prevalent in some states, encompasses all assets and income acquired by either spouse during marriage, considered jointly owned.

In community property states, even if only one spouse files, all community property and the filing spouse’s separate property become part of the bankruptcy estate. Jointly owned assets could be subject to the bankruptcy process to satisfy debts. Conversely, in separate property states, only the filing spouse’s separate property and their interest in jointly held property enter the bankruptcy estate. The non-filing spouse’s separate property is not affected.

Jointly held assets (e.g., marital home, joint bank accounts, vehicles) require careful consideration. If both spouses are on a marital home mortgage, the non-filing spouse remains liable for the debt, even if the filing spouse discharges their obligation. Bankruptcy exemptions, which vary by state, allow debtors to protect equity in their assets. These exemptions apply to the filing spouse’s interest in jointly owned property; the non-filing spouse’s share may be protected depending on state law.

Joint debts (e.g., mortgages, car loans, credit cards) pose a challenge. While the filing spouse may receive a discharge, the non-filing spouse remains legally responsible for the full balance. Creditors can then pursue the non-filing spouse for repayment. In some cases, the filing spouse might enter a reaffirmation agreement to continue paying a secured debt (e.g., mortgage, car loan), allowing them and their spouse to keep the asset. This agreement must be approved by the bankruptcy court and means the debt will not be discharged.

An automatic stay, which temporarily halts collection actions, applies only to the filing spouse. The non-filing spouse may still face collection calls, lawsuits, or other efforts from creditors seeking payment on shared obligations. This often necessitates direct communication with creditors or exploring repayment options.

Post-Bankruptcy Financial Planning

After bankruptcy, couples face important financial planning to rebuild stability. For the filing spouse, rebuilding credit is a primary focus, as bankruptcy remains on credit reports for several years (typically seven for Chapter 13, ten for Chapter 7). Strategies like obtaining a secured credit card, taking out a small credit-builder loan, and consistently making payments on time can improve credit scores.

Individual bankruptcy can influence future joint financial decisions. Applying for new loans (e.g., mortgage, car loan) or seeking new credit as a couple may become more challenging. Lenders assess the credit history of both individuals; bankruptcy on one spouse’s record may result in higher interest rates or stricter approval criteria. It is advisable to wait post-bankruptcy before making significant joint financial commitments to allow for credit rebuilding.

Open communication and joint financial planning are essential following bankruptcy. Discussing financial goals, budgeting, and debt management strategies can prevent future financial distress. This includes reviewing income and expenses, setting savings targets, and establishing guidelines for new debt.

When considering future debt, couples should approach new obligations cautiously. While the filing spouse may be free from past debts, taking on new joint debt requires careful consideration of the household’s ability to repay. Understanding the implications of co-signing and maintaining separate credit where appropriate can be beneficial.