Just because you have credit cards together doesn’t necessarily mean you are both liable. It is common for only one person to sign the credit card authorization documents and then only one person is liable for the debt. If you made your wife or husband an authorized user, than that is all he/she is, an authorized user. They wouldn’t be liable be for the debt unless they signed paperwork at the time the card was issued. If one spouse has 20k in credit card debt individually and the other spouse has 15k in credit card debt individually it probably makes sense to file jointly even through the debt isn’t joint debt. If you and your spouse both signed the credit card authorization documents you are both 50% liable. If only one of you files bankruptcy on the debt that means the spouse who filed is no longer liable, but the other spouse is now 100% liable.
In Minnesota the law is that you and your spouse are jointly and severally liable for any necessary medical services that were done while you were living together. If the bill was from before you were married or you were separated at the time of the medical services then you wouldn’t be responsible for the other’s bill. This means that it is common for a medical provider to try to collect from your spouse for an unpaid medical bill in the other spouse’s name. This often times is the determining factor for if both spouses should file bankruptcy. If there are a lot of medical bills out there it may make sense for both spouses to file in order to avoid the debt from being collected on after only one spouse has filed.
With car loans and mortgages there are often many documents that get signed at the time of purchase. Your credit report should reflect your liability, if you no longer have the paperwork, or can’t read the paperwork from the sale we will turn to the credit report. Often times in a bankruptcy you will want to continue to make the house and the car payment. If that is the case, and a non-filing spouse or cosigner is on the loan, that other cosigner should not have their credit affected. As long as the mortgage or the car loan is getting paid on time it will not reflect negatively on a credit report.
If a car loan or mortgage has stopped being paid and there is a non-filing cosigner on the loan that will negativity impact the non-filer’s credit. If a bankruptcy discharge is received, then the non-filing cosigner will now be 100% liable for the loan.
Many parents cosign on student loans. If a parent files bankruptcy, the student loan will still remain and be an obligation of anyone that signed the student loan papers. Student loans are non-dischargeable in a bankruptcy. You may find that after a bankruptcy has been filed the student loan will go into deferment for the length of a chapter 7 bankruptcy—usually about three months. Interest will still accrue but the student loan doesn’t need to get paid by anyone during that time period. In a chapter 13 plan the student loan that mom or dad cosigned on will actually get paid on the chapter 13 plan. Meaning no payments will need to be paid separately during the chapter 13 plan, either a 3 year or a 5 year plan. This could provide relief to the student loan holder that didn’t file a bankruptcy. Of course interest will still accrue so you can still make payments outside the chapter 13 plan. If a debt is solely in one spouse’s name and there are no medical bills from the marriage than it may make sense for only one spouse to file. This will prevent both spouse’s credit from taking a hit when a bankruptcy is filed. It would allow one of the spouses to be able to more easily qualify for car loans or a mortgage in the future.
Filing an individual bankruptcy or filing a joint bankruptcy is the same cost in terms of court fees and attorney fees.
Deciding whether only one of you or both of you should file bankruptcy is a conversation that should be done with a Minneapolis Bankruptcy Lawyer. It can be complex and we will want to make sure we account for all debt that is out there in order to make sure we are making the correct determination. Contact me today for further information by getting in touch with me at: