Bankruptcy before saying your wedding vows can save your new spouse from the harmful effects of your debt issues. Debt and finances are not exciting topics to discuss when deciding to get engaged or married, but failure to address existing debt issues turn your wedded bliss into a series of lawsuits and garnishments that threaten your financial future together and get in the way of that white picket fence.
Debt issues can snowball and result in collection notices and calls, lawsuits, and garnished wages or bank accounts. These items can affect your credit and ability to hit milestones together, such as combining finances and buying a home.
Advantage to Filing Before Marriage
Filing bankruptcy before marriage allows you to take care of your debt issues without the dedication of your spouse’s income to the payment of your pre-existing debt. After you say “I do,” the bankruptcy code combines your income and the income of your spouse to calculate your household income. This gross household income will be used to determine whether you may file a chapter 7 or chapter 13 bankruptcy, and if a chapter 13 bankruptcy is required, the amount of disposable income that you and your new spouse have to pay off your debt. This is called the Means Test. This calculation is universal and will not change even if you and your spouse keep finances strictly separated in actual practice.
Filing After Marriage
Not resolving your debt issues before getting married does not make your new spouse responsible for your debts, but it will make the road to debt relief more complicated. Specifically, filing bankruptcy after you get married will subject household assets to scrutiny as to whether the assets are marital property and your spouse’s income as detailed above will be used to determine whether a monthly payment should be made to creditors as part of a chapter 13 bankruptcy.
Talk it out with a Professional
A bankruptcy professional can help you with the discussion of how best to plan and execute your bankruptcy. Most professionals offer a free consultation, and will help you and your future spouse get peace of mind with knowing that there is a plan in place to resolve the debt issues before the “I do” becomes “I will pay back your debt.”
Frequently Asked Questions
Will my bankruptcy affect my partner’s credit?
Married or not, your significant other’s name and social security number will not be attached to your bankruptcy filing. However, if you have joint debts or have co-signed on obligations for each other, then that creditor may report to the credit bureau of the bankruptcy, and that could affect your significant other’s credit. Your significant other will still be responsible for the debt despite your bankruptcy filing, and he or she should ensure to make the payments on-time. Electronic payment options may not be available during the bankruptcy proceeding, but your significant other making on time payments and calling the creditor about how it will report the debt to credit report agencies could go a long way.
What about my engagement ring and items purchased for the wedding?
Your engagement ring and any wedding items purchased before bankruptcy are required to be listed as an asset in your bankruptcy paperwork. Your decision and planning for your bankruptcy should be done well before Aunt Betty gives you those gold cufflinks or buys a $7,000 dress as your wedding gift. The earlier you file, the better, so the gifts you receive before your marriage are not subject to turnover to the trustee.
