If my spouse files for bankruptcy, do I need to as well?

One of the most frequent questions our married clients ask is how an individual’s decision to file for bankruptcy will affect their spouse and the debts that they hold with their spouse. To answer this question, it is important to understand how courts handle debts that are jointly owned by a married couple.

Initially, it is important to dispel the common myth that married couples are automatically liable for the other’s debts. That is not the case. Typically, if the husband is filing for bankruptcy, the wife will not then be liable for all of the husband’s debts. If the husband files for bankruptcy, it should not affect the wife’s credit score. Of course, if a husband and wife both incur debt together, the situation is different. In this case, when the husband files for bankruptcy, the husband will no longer be responsible for the debt, but the wife will be entirely responsible for it. Thus, it is very important to understand the total assets and debts of each spouse before either spouse decides to file for bankruptcy.

One important factor to consider when thinking about filing for bankruptcy is the property each spouse owns. When someone files for a Chapter 7 bankruptcy, the trustee will collect all the filer’s assets and liquidate them to cover the filer’s debts. If the husband files for Chapter 7 bankruptcy, the wife’s assets will not be part of the bankruptcy estate. Couples can strategically file for bankruptcy. However, it is important that potential filers understand that the law prevents individuals from transferring assets to avoid the asset becoming part of the bankruptcy estate.

Married couples can, but do not necessarily have to, file bankruptcy jointly. When a couple files bankruptcy together, the trustee will liquidate all of the couple’s assets and use the proceeds to pay off the couple’s collective debts. This option also saves on the filing fee associated with filing for bankruptcy.

If you or your spouse is considering filing for bankruptcy, contact the dedicated Georgia bankruptcy law firm of Morgan & Morgan, P.C.

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