Filing Bankruptcy Before You Get Married Is Typically Best

Should You File?

Let’s talk about a bankruptcy scenario that comes up from time to time. Let’s say you’re someone who is struggling with debt, you’re single, and you finally found someone you want to marry. Your future spouse does not have any debt and he or she has a very good income. The question is should you file for bankruptcy prior to getting married? The answer is a little bit complex. It used to be that if one party to a marriage had debt, that party could file a chapter 7 bankruptcy and get a fresh start. This could be done regardless of what the non-filing spouse earned per year. The old law basically said that just because you are married, the non-filing spouse’s income is not a factor in terms of whether or not you can file. Everything changed with bankruptcy reform in 2005. Essentially, you are now prohibited from filing an individual bankruptcy without considering the income of the non-filing spouse.

 Common Scenario

Let’s take a look at this example scenario. Husband is carrying $50,000 worth of credit card debt. Wife has no credit card debt and she earns $95,000 per year. Husband starts to get garnished and his bank account is frozen due to outstanding judgments for his credit card debt. All of a sudden he is not able to contribute towards the household income. Wife would like for him to eliminate his debt so that he can start contributing towards household expenses. However, under the current law her income would prevent him in many cases from being able to get out of debt. This is because the new law focuses on the total household budget. So now the wife’s $95,000 per year is a huge factor into whether or not husband can file. The law basically states that wife should contribute and help pay off his debt in this particular case. The law states that if the couple has the ability to reorganize, husband should file a chapter 13. This is all in spite of the fact that none of the credit card debt is the wife’s.

Clear Up You Finances

For the reasons stated above, this is why it is so critical that somebody clears up their financial situation prior to getting married. If a person does not clear out their financial situation prior to getting married, then they are putting their spouse into the mix financially. It doesn’t mean that the creditor of one party can sue the non-filing party, however it will prevent in many cases a person from being able to eliminate the debt. The one exception to this general suggestion that one should clear up there debt prior to getting married would be the case where both parties have significant debt that they wish to eliminate. In that situation, it makes sense to wait until you’re married provided that they still qualify under the means test. In that case, the parties can file one case, one filing fee, one attorney fee, and both get the results that they are looking for. This is something that needs to be discussed with a bankruptcy attorney prior to deciding if and when to file.

The Big Take Away

The biggest take away from this article is to remember this: total family budget is considered in determining whether a party can file a bankruptcy. It is also factor in determining which chapter of the bankruptcy code will be applicable. Thus, if you are struggling financially and you are thinking of getting married, you most likely will want to clear up your financial situation prior to getting married. It’s never a good idea to start off in a marriage carrying debt. It’s even worse when you may not be able to file bankruptcy after you get married because of your non-filing spouse’s income.

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