Middle aged man and woman are calculating expenses

You work extremely hard to provide for your family, but every week on payday, your paycheck disappears as you hand over all your money to creditors. When debts become overwhelming, chapter 13 bankruptcy can be a powerful tool to help regain control. However, if you are married, there is a crucial question: How will filing for bankruptcy affect your spouse?

The Core Principle: Your Bankruptcy, Your Debt

The most important thing to understand is that, when you file for Chapter 13 bankruptcy, it does not directly affect your spouse’s credit history. According to U.S. Courts, an individual’s bankruptcy filing does not appear on a non-filing spouse’s credit report. Your bankruptcy is a legal process for dealing with debts that you personally owe. 

However, practical consequences of filing may have a significant impact on your household and spouse, depending on whether the debt is individual or shared between you and your spouse.

Joint Debts vs. Individual Debts

Joint Debt: If you and your spouse have joint debts, such as a co-signed credit card or loan, you are both 100% responsible for paying the entire amount. When you file for Chapter 13 bankruptcy, the automatic stay under 11 U.S. Code § 362 immediately protects you from collections on those joint debts. 

Creditors are not allowed to call, sue, or take money from your wages. However, this protection does not extend to your non-filing spouse. They can still be pursued by creditors for the full amount of joint debt. Your bankruptcy plan will help you repay a portion of the debt, but you will still be personally responsible for any remaining balance.

Individual Debts: If the debt is only in your name, your bankruptcy filing will handle your obligation. Your spouse will not be responsible for these debts and will be protected from collection actions for them.

How Your Spouse’s Income Factors Into the Plan

A key part of Chapter 13 is calculating your discretionary income to fund your payment plan. If you are married but filing as a single person, the court will take into account your spouse’s income, because it contributes to household expenses even if they do not file their own taxes.

The U.S. Bankruptcy Code, Title 11, § 1325(b) requires the court to take into account the income of a debtor’s spouse if they are not separated. This means that your spouse’s income will be considered in the Means Test calculation, which determines the length of your plan (3 or 5 years) and the payment amount. The purpose of this is to ensure a fair payment based on the total financial situation of your household.

Protecting Your Spouse’s Assets

Another major concern is whether your spouse’s property is at risk. Generally, property that is solely owned by your non-filing spouse will be protected from your individual bankruptcy proceedings.

Georgia has specific bankruptcy exemptions that allow you to protect certain assets. Property that is solely titled in your spouse’s name and is claimed under their exemption is typically not included in your bankruptcy estate, but any jointly owned property can be considered. It is essential to consult with an experienced attorney to properly exempt and protect all eligible assets for both you and your spouse.

The Option of a Joint Filing

For many married couples, filing for bankruptcy jointly is often the best course of action. A joint bankruptcy filing:

  • Protects both spouses from debt collection efforts on all shared debts.
  • Addresses all marital debts in a single, unified plan.
  • Can be more cost-effective than two separate filings.
  • Results in a single court filing fee.

How Chapter 13 Can Ultimately Benefit Your Entire Family

lawyer is shaking hand with the client

While it requires careful planning, a Chapter 13 bankruptcy filing can provide several benefits for you and your family, including:

  • Stopping wage garnishment: The automatic stay under 11 U.S. Code § 362 halts garnishments against your wages, increasing the available household income for living expenses.
  • Saving your home: Chapter 13 can prevent a foreclosure and allow you to make up missed mortgage payments over time, protecting your family’s home.
  • Creating a unified plan: It consolidates all your debt into a single monthly payment, reducing stress and providing a clear financial plan for the future.

Get Experienced Guidance for Your Family

Navigating an individual Chapter 13 bankruptcy case while protecting your spouse can be a complex process that requires expert legal guidance. The rules surrounding this type of bankruptcy are intricate, and making a mistake can lead to unintended consequences for you and your partner.

At Duncan Bankruptcy Law, we specialize in helping clients navigate through these complex situations. We have experience handling over 10,000 bankruptcy cases and can carefully analyze your specific circumstances to ensure that both you and your spouse are protected. Our goal is to help you obtain the best possible outcome and create a plan that will set your family up for long-term success.
Our initial consultation is free, so you can get the clarity and peace of mind that you deserve. Contact us today to discuss how Chapter 13 might benefit you and your loved ones.