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What happens to joint debts when only one spouse files bankruptcy

Just like when filing taxes, married couples have a choice to file for bankruptcy jointly or separately. But if your spouse opts for bankruptcy and you don’t, what will happen to the debts you hold together?

The good news is that, in most cases, your partner’s bankruptcy filing won’t significantly impact your financial situation.

Perhaps the biggest advantage to having your spouse file separately is that bankruptcy is only recorded on the filing spouse’s credit report. This can be especially helpful if you have a better credit score than your partner, as you may still be able to qualify for loans or credit while your spouse is going through bankruptcy and, later on, rebuilding credit post-bankruptcy.

Choosing not to file with your partner may also be a smart move if you own large assets you would like to protect from creditors, such as a home, or if you make substantially more income than your spouse, which would keep you from qualifying for Chapter 7 bankruptcy if you filed together.

Of course, there are some drawbacks to not filing for bankruptcy alongside your spouse.

As the non-filing partner, you’ll need to continue making payments on all jointly held debts (and any individually held debts) in order to protect your credit. For this reason, married couples with many jointly held debts may be better off filing together simply so that one partner does not have to continue making payments.

It’s also important to keep an eye on your credit report to ensure the bankruptcy isn’t mistakenly reported on your co-owned debts.

Ultimately, whether or not you should file for bankruptcy with your spouse is a personal decision largely dependent on your unique circumstances. What’s important is that you find a solution that allows the both of you to reduce your debt burden, improve credit, and work toward a more stable financial future.

Speaking with a knowledgeable bankruptcy attorney is the best way to determine whether bankruptcy is right for you and your marriage. At DebtStoppers, our experienced bankruptcy lawyers can help you discover your path to financial freedom. Call us or visit us online to schedule your complimentary personal financial consultation today.

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