Does Bankruptcy Affect Your Spouse?

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By: Bill Henry
PublishedJun 9, 2020
2 minute read

Does bankruptcy affect my spouse? It’s a common question bankruptcy attorney’s receive on the regular.

This article delves into this important question.

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Does Bankruptcy Affect My Spouse?

A lot of people are concerned about how filing a bankruptcy will affect their spouse. Because it’s true, just because you file a bankruptcy it does not mean that your spouse has to.

That being said, some of your spouse’s information, such as income and certain assets, are still required to be part of your petition to provide the court with a full picture of your household finances and assets.

Depending on where you live could drive the answer to the question of how your bankruptcy filing will affect your spouse.

Your Location Carries a Lot of Weight

There are both common law and community property states. Most states are common law states, including Colorado.

Property in Common Law States

In common law states, if your name is on a deed, you own that property.

If both yours and your spouse’s name are on the deed or title, you have a half interest in that property.

If there is no title, you own it if you can prove that you paid for it.

Property in Community Property States

In comparison, in community property states, both spouses own an equal share of most property acquired during the marriage, regardless of whose name is on what deed.

Potential Issues in Common Law States

Depending on the chapter of bankruptcy and the type of asset at issue, there could be issues in common law states if your spouse did not file the bankruptcy with you.

One example is that if property with joint ownership cannot be easily divided, it may be sold and half of the proceeds get applied to your debt.

In that scenario, the bankruptcy trustee must show that the benefit of selling the particular property would outweigh the detriment to your spouse.

Joint Debts & Your Spouse

Another consideration is that although your debts might be discharged from a bankruptcy, this does not affect how much your spouse is now responsible for if it was a joint debt or if they have their own individual debt.

Your spouse will likely be on the hook for any balance owed on a joint debt. Your spouse is not responsible for debt that was solely in your name and was discharged.

Speaking with a bankruptcy attorney about the protection of your spouse is important because everyone’s finances, debts, and assets are different.

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