If you go bankrupt, does it affect your spouse?

There may be a point at which your debts are so overwhelming that you have no way to pay them. A medical emergency or loss of employment puts many people in such a hole that the only way out is bankruptcy. If people are married, however, they have another concern: if you go bankrupt, does it affect your spouse?

The answer is yes and no, depending on your specific situation. The time to ask if bankruptcy affects your spouse is when you are first establishing your marriage and your financial situation.

• Community Property – Some states are community property states, meaning that all assets in a marriage are considered joint, whether or not both spouses have their names on those assets. In the same way, any debt in these states also belongs equally to both spouses. Therefore, even if you are the one with the credit card debt or with the huge medical bills, your spouse is on the hook for those debts as well if you live in a community property state.
• Loan Co-signing – If you and your spouse have joint accounts for home, credit card or medical debt, then your spouse will be affected by a bankruptcy filing. Your spouse may need to file with you if they are unable to pay the remaining debts themselves. Regardless, they will still be on the hook for the debt, even if you file for bankruptcy.
• Pre-existing Debt – If one spouse in a marriage had debt prior to marriage, then they are likely solely responsible for that debt. If that is the debt that is requiring that they file bankruptcy, it is not necessary for the spouse to file. Engaged partners should make full financial disclosure to one another so that they both know about any existing debt. If one spouse, or both spouses, is in debt prior to marriage, it is best to avoid opening any joint accounts of any kind. Instead, make up an agreement about which expenses are the responsibility of which spouse.
• Consult an Attorney. Because these issues can become very complicated (for example, debt on real property is treated differently from consumer debt) you should see an attorney and discuss all of the issues before filing for bankruptcy. You will want to make the best decision to promote your future recovery, and doing things right in the beginning will allow you to do so.