A Rancho Cucamonga Bankruptcy Lawyer Explains What Happens to Your Spouse if You File for California Bankruptcy Individually

A Rancho Cucamonga Bankruptcy Lawyer Explains What Happens to Your Spouse if You File for California Bankruptcy IndividuallyIf you’re married, a resident of California, and you’re drowning in debt, you might be debating whether to file for bankruptcy individually or jointly with your spouse. If you decide to go it alone, you might wonder if your spouse will lose some of their personal belongings, if they will be held liable for your debts, and if their credit would be affected. In general, no to each of these questions.

Keep reading to get the facts and then contact Law Offices of Terrence Fantauzzi at (909) 552-1238 to speak with an experienced Rancho Cucamonga bankruptcy lawyer.

California is a community property state

Because California is a community property state, nearly all assets acquired or income made during a marriage are regarded as jointly owned. The same holds true even if just one person’s name appears on an account for obligations incurred during a marriage.

Since all communal property is included in the bankruptcy estate as a result of your filing for individual bankruptcy, creditors will be able to pursue payment through the sale of any nonexempt community assets. You will receive a discharge at the conclusion of the case, which bars creditors from going after your spouse once your individual case is over. This discharge also stops creditors from going after any community debt. This safeguard for your partner is known as a “phantom discharge.”

What you must do if you file on your own

If you file separately, you must report your household’s total income, which includes both your own and your spouse’s earnings. You only utilize the non-filing spouse’s income to determine whether you meet the requirements for Chapter 7 bankruptcy under the means test. Because the law anticipates spouses to assist each other in repaying most types of debt, if your spouse has a high income, you could not be eligible for Chapter 7. If your spouse’s income prevents you from being eligible, you might be able to use Chapter 13 instead.

Some property is not community property

Your spouse’s independent property, such as real estate acquired prior to marriage or an inheritance received at any time, is not considered communal property and is therefore excluded from the bankruptcy estate. There are few exceptions, including where an asset was used to secure a jointly incurred obligation, but generally it is untouchable by creditors. If any of your spouse’s separate property is at risk of creditors’ activities, your bankruptcy lawyer will be able to offer you an idea.

Your spouse’s credit score is not likely to be affected

Even though the bankruptcy affects community assets, your spouse’s credit score should be unaffected if you file for individual bankruptcy. One spouse’s bankruptcy discharge may not always show up on the other spouse’s credit report since credit bureaus keep information for each individual separately. However, debts for which your spouse is a co-borrower will be listed in the report.

Talk to a Rancho Cucamonga bankruptcy lawyer for additional assistance

If you are not sure what your best options are, if you do not know if bankruptcy would be in your best interest, or if you are not sure if you qualify, we invite you to contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a consultation.

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