Non-filing Spouses

When one spouse files a bankruptcy the effect on the other spouse is normally minimal.

When one spouse files, the community property that is under the joint control of both spouses falls into the bankruptcy estate. In most bankruptcies this property is not lost because it is exempt.

The bankruptcy of one spouse can effect the credit of the other spouse, but this is normally an error on the part of credit reporting agencies and it can be corrected. However, if the bankruptcy of one spouse results in the non-payment of debts of the other spouse, the credit of the non-filing spouse can be effected.

The discharge of the filing spouse can significantly benefit the non-filing spouse because the discharge of one spouse prevents collection against the community property of both spouses.

So, where one spouse is not liable for the debts of the other spouse, it is wise not to file for the other spouse.

Non-filing spouse bankruptcies can be rather tricky, however, because of a non-filing spouse can relatively easily conceal assets that belong to the filing spouse. Therefore, in order that the bankruptcy be unassailable, the assets of the non-filing spouse should be disclosed as well.

Charles Chesnutt