- March 4, 2021
- Kelvin Birk
One partner can file bankruptcy without their spouse in Missouri; and in many cases, a partner can do so without affecting the other spouse’s credit record. However, even though an individual bankruptcy may eliminate the filing spouse’s liability for jointly-held/co-signed debts, this does not stop creditors from pursuing the non-filing spouse for repayment of these debts. In other words, your filing individual bankruptcy does not protect your spouse from co-signed or jointly incurred debts.
For this reason, it may be best to file for bankruptcy as a couple. It is also important to remember that some debts cannot typically be eliminated through bankruptcy, including taxes, student loans, alimony and child support payments, but in some cases even these debts can be discharged in bankruptcy. It’s important to understand specific state and federal laws before deciding whether to file individually or jointly with your spouse.
If you have questions about filing bankruptcy, the attorneys at Birk Law Firm would be glad to provide answers. We will review your case and explain your options, including the pros and cons of filing with or without your spouse. Call us at 573-332-8585 for a free initial consultation.
What are the different kinds of bankruptcy?
There are two types of bankruptcy that you can file as an individual or couple. Chapter 7, also known as “fresh start” bankruptcy, is the most common bankruptcy. Chapter 13, also known as “wage earner” or “debt reorganization” bankruptcy, may be the right option if you earn too much to qualify for Chapter 7.
Chapter 7 Bankruptcy
This is a personal liquidation of your assets to pay off some of your debts. Any remaining debt is usually discharged under Chapter 7. Many or all of your assets – such as your house and vehicles – do not have to be liquidated. Many Chapter 7 bankruptcy filings are “no assets” cases, where none of the assets have to be sold to pay your debts.
Chapter 7 is usually more advantageous for the filer, though not everyone qualifies. There are certain income requirements using the “bankruptcy means test” for someone to qualify for Chapter 7. One calculation determines whether your income is below the state median for your household size. This calculation must be made before filing. If you do not qualify for Chapter 7, then you will likely want to pursue Chapter 13.
Chapter 13 Bankruptcy
This is a personal reorganization of debt that spreads repayment out over a three- to five-year period. Sometimes simply restructuring debt into more favorable terms provides enough relief for a bankruptcy filer to move forward successfully. In a Chapter 13, you must have an adequate and sustainable income. Some of your future earnings will be paid toward your current debts. Some or all of your unsecured debts are typically discharged, but the amount of debt discharged without payment depends on the amount of your current income and debts.
One advantage of Chapter 13 is that you can keep your home, even if it is in foreclosure or you are behind on your payments. You can stop foreclosure proceedings under Chapter 13 and work out a longer mortgage repayment plan than the current mortgage holder would typically allow.
It’s important to remember, though, that if one party files without their spouse, then the spouse’s credit record would typically be spared from any negative impact. However, if you live in the same house with your spouse, even in an individual bankruptcy the spouse’s income will be included when determining your household median income. So this could impact whether or not you qualify for Chapter 7. The reasoning behind this is that Missouri bankruptcy laws assume that if you’re living in the same house with your spouse, you are sharing expenses and income.
Can I file bankruptcy without my spouse knowing?
Sometimes if couples are struggling or planning to divorce, they may be considering filing bankruptcy without their spouse knowing it. We often discourage this path. Joint filing of bankruptcy before divorce, when possible, can eliminate the need to litigate issues of debt during divorce proceedings, thereby saving attorneys’ fees and expediting the divorce. A divorce court can divide joint debt between divorcing spouses, but it cannot change the terms of the debt with creditors. So you and your spouse will still be responsible for these debts even after the divorce is final.
Also, couples who file bankruptcy jointly before divorce can exempt double the amount of assets. This may be a benefit in your specific situation. The best way to determine how to proceed financially when divorce is being considered is to talk to our skilled bankruptcy attorney before making any legal decisions.
How long does a bankruptcy stay on my credit record?
Typically, the following rules apply:
- Chapter 7 usually stays on your credit record for 10 years.
- Chapter 13 typically remains on your credit record for 7 years after the repayment plan has been successfully completed.
- Items such as taxes, alimony, child support and student loans usually cannot be discharged through bankruptcy, so those debts will remain until they are repaid, even though enough time has passed so that a bankruptcy no longer shows up on your credit record.
Contact our skilled and experienced bankruptcy attorney today
There’s nothing worse than the stress and pressure of mounting bills that you don’t have the resources to pay. It can mean sleepless nights, fights with your spouse, and trouble at work. If you want to put a stop to harassing phone calls and letters from creditors, bankruptcy could be your answer. If you want a fresh start that puts you on a sounder financial footing, there is a brighter path forward. Whether you file individually or jointly with your spouse, there are ways to discharge debt while still holding on to important assets like your family home and vehicles. The most important thing to do is explore your options before making any decisions. The skilled and experienced bankruptcy attorneys at Birk Law Firm will review your case and explain your options, including the pros and cons of filing with or without your spouse. To find out more, call us at 573-332-8585 for a free initial consultation.