Filing for bankruptcy without ruining your spouse’s credit

Life for a large percentage of Chicagoland residents has drastically changed in the first quarter of 2020.  Whether you’ve been furloughed with an uncertain return date or laid off with a severance, chances are money is tight. If you have been struggling for several months already, bankruptcy may start looking like a good option.

It can give you some breathing room for the bills that continue to arrive, despite there being less money to pay them. I can help you determine if filing for bankruptcy in Chicago is your best option and provide you with the information to decide if Chapter 7 or Chapter 13 fits your needs better.

File bankruptcy as single or married

It makes sense that you can file for bankruptcy if you’re single, and many couples file jointly for Chapter 7 or 13. However, did you know you can also petition as an individual even if you are married? Although the law allows a married couple to file bankruptcy, it doesn’t require it.

Why file as an individual

There are strategic reasons to do this, depending on your specific circumstances. For example, if you want to buy a home in the near future, you can file for Chicago bankruptcy and prevent significant damage to your spouse’s credit. Debt that you accrued on your own, such as a credit card, does not become your partner’s legal burden. If the liability qualifies for discharge in bankruptcy, creditors cannot attempt to collect the debt from your other half.

Only joint debt, such as a mortgage that you both sign, is a shared responsibility. However, if there is joint debt, and only you file, creditors could pursue collections from your spouse. If you share a significant amount of liability, it may be better if you also file for bankruptcy jointly. 

Spousal income counts

A point that is often overlooked is spousal income. It counts in the bankruptcy filing, even if you plan to file as an individual. Under Chapter 7, his or her income must be below a certain level. When considering Chapter 13, the income must be above a particular level. 

Bankruptcy myths

A common myth is that you won’t be able to get credit after filing bankruptcy, or that it will be a decade before you can get back on your feet. Neither of these are true. Yes, bankruptcy stays on your credit for seven to ten years, but you will also likely start receiving credit card offers within weeks of the debt discharge.

Chances are the offers will be for secured cards with a low limit. This gives you the opportunity to begin rebuilding your credit almost immediately. If you have responsible spending habits, your credit score can jump quickly.

Another common myth is that you’ll lose everything. This is not true. When done correctly, your house, vehicles and other assets are still yours. However, not all debt is wiped out in bankruptcy. While personal loans, utility bills, medical expenses and rent are discharged, student loans, back child support and spousal support remain.

Learn more about Chicago bankruptcy

Filing for Chapter 7 or Chapter 13 doesn’t mean you’ve been financially irresponsible. Life happens. Long term unemployment or underemployment and medical bills are driving more people to file bankruptcy than ever before.

No one should have to live with staggering debt looming over them. Contact me today or call 312-853-3100 if you’re ready put your finances in order and get your life back on track. My W Jackson Blvd office near S. Morgan St is easy to reach, but you don’t need to come in for a consultation with me. I’m happy to schedule a phone appointment at a convenient time.

Leave a Comment

Call Now ButtonCall Now