If a person files for personal bankruptcy, can their spouse still own property and assets?
Yes, even if you and your spouse filed for personal bankruptcy, your spouse still owns some assets. If your spouse received inheritances, gifts, or a personal injury settlement, these assets remain separate property. Your spouse can rest assured that these will not be used to pay your debts. However, if your spouse expects to receive a windfall, they will have to turn over the nonexempt amount.
Exemptions under bankruptcy law
Several exemptions may apply to you and your spouse when you file for personal bankruptcy. Federal bankruptcy exemptions apply to certain kinds of assets and dollar amounts, while state exemptions may vary. Typically, an exempt property is something you do not owe or cannot be repossessed. Exempt property may include alimony, child support, business partnership property, and liquor licenses. These assets will appear on Schedule C of your bankruptcy filing. However, you should keep in mind that the trustee and your creditors may object to your claim.
The state in which you live will determine which exemptions apply to you. If you have been a resident of that state for seven months or more, you may be able to use those state exemptions. If not, you will need to use the federal exemptions that apply to you.
Protection of separate property
While filing for personal bankruptcy can be stressful and emotionally devastating, couples who have separate property may be able to keep it separate in bankruptcy. Often, this is possible through prenuptial or postnuptial agreements that separate property. A prenup can also protect the property of one spouse from the other's creditors.
Separate property can be an issue if one spouse has significant separate debt. In such cases, filing as an individual may be the best choice. While the filing spouse's credit rating will suffer, the filing spouse's separate debt will remain protected. It can also make the recovery process easier.
The protection of separate property when filing for personal bankruptcy may also extend to the spouses' paychecks. While the paychecks of a filing spouse are protected, those of the non-filing spouse is vulnerable to garnishment and repossession. A community property discharge protects wages that have been earned by both spouses during the marriage. Only legitimate creditors of the non-filing spouse may enforce a debt against the separate property.
Effect of bankruptcy on the credit rating of the non-filing spouse
The credit rating of a spouse who files for bankruptcy will not affect the credit rating of the non-filing spouse. However, there are a few things to keep in mind. First, you should make sure the non-filing spouse makes all necessary payments on the joint accounts, even if your spouse files for bankruptcy. Although the filing spouse will get a discharge of his debt, the non-filing spouse will still be liable for the debt if he or she fails to pay.
Second, it's important to note that even if your spouse files for bankruptcy, you will not be affected if your credit rating is not affected. You'll have to check with your creditor to find out how your bankruptcy will affect your credit score. You should also be aware of the period after filing for bankruptcy. You'll need to wait at least a year after the discharge for your credit report to be affected.
If you have any questions, you can get a free consultation with Ascent Law LLC:
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
