When you are reeling under a heavy load of debt, you may be worried about paying it off, and it’s natural to assume that your spouse is also responsible for shouldering this burden. Many people are surprised when they discover that this may or may not be the case. In reality, it all depends on the laws of the state in which you reside.
Some state laws automatically hold your spouse responsible for any debt you owe, while in other states, your spouse is not responsible for your debts unless he or she is a cosigner on the debt. If your spouse is automatically liable under the Act, then it may be best if you file joint bankruptcy.
Often, a person may file for bankruptcy thinking that assets in their spouse’s name cannot be seized and find out too late that this is not true. When planning to file bankruptcy, it is best to consult a good bankruptcy attorney who can help you make the decision of whether he should file bankruptcy individually or choose to file joint bankruptcy. In states other than Washington, Wisconsin, Texas, Nevada, Louisiana, Arizona, California, New Mexico, and Idaho, you are not automatically responsible for your spouse’s debts, except where you have been a cosigner.
In the nine states listed above where community property law applies, your creditors can garnish any income or assets that were earned during the course of the marriage when you file bankruptcy. Some exceptions to community property are inheritances and gifts, which you can keep if your spouse files bankruptcy. But you need to understand that as a resident of one of these states, you are both responsible for debts incurred by either state. In this case, you must file joint bankruptcy if your spouse has debts that cannot be managed.
The final information you need once you have made the decision to file joint bankruptcy is the type of bankruptcy you should choose. An option that releases all your debts through non-exempt asset liquidation is Chapter 7 bankruptcy. On the other hand, if you want to keep some of your assets, filing for Chapter 13 bankruptcy can help you pay off your debts for 3 to 5 years according to a payment plan. An additional benefit of Chapter 13 bankruptcy is that if you are behind on your mortgage payments, you can catch up on them.