Bankruptcy and Your Spouse

If my husband and I have credit card debt together and one of us file for chapter 7 and get discharged, can the credit card company collect from the spouse that didn’t file for bankruptcy?

The COVID-19 pandemic has devastated Florida’s economy, leaving almost 1.4 million Floridians unemployed.  The many layoffs and subsequent filings for unemployment resulted in more than 10 billion state and federal dollars being spent on Floridian unemployment payments in mid-July.  This staggering amount of unemployment payments is indicative of a future flood of personal bankruptcy filings should the unemployment benefits stop.

 Many married partners are now concerned about how filing for Chapter 7 bankruptcy will affect them.  Chapter 7 bankruptcy discharges certain debts at the cost of liquidating eligible assets.  When one spouse files for a Chapter 7 bankruptcy, it is important to note that the discharge will only eliminate debts under his or her name.  The individual discharge will not affect the non-filing spouse’s separate debt.  Because Chapter 7 bankruptcy only impacts the debt of the filing spouse, creditors usually cannot reach the non-filing spouse’s individual assets to pay for the filing spouse’s debt.  This includes vehicles or property listed only under the non-filing spouse’s name.

The reality is however, that married couples often share joint debts.  Examples of such debts are: shared credit cards, vehicles, or properties listed in both spouses’ names.   Although the filing spouse may have eliminated his or her responsibility for the joint debt, the non-filing spouse assumes the burden of paying back that debt.  In this situation, creditors can take certain jointly-owned assets to pay off these debts.  Creditors may only pursue joint assets if the filing spouse’s assets are completely exhausted after paying all individual debts and the proceeds are insufficient to repay the joint debt.

In order to divide joint assets between creditors in a Chapter 7 bankruptcy, the court appoints a trustee to confiscate and liquidate joint assets.  The joint assets must be “non-exempt” according to Florida’s bankruptcy exemption standards.  Non-exempt assets can be seized by creditors and liquidated in order to repay debts.  Examples of non-exempt assets include family heirlooms, expensive instruments, second vehicles, and other similar items.  If the trustee liquidates a joint asset, they are required to return half of the proceeds to the non- filing spouse.  The trustee will then use the filing spouse’s share of the proceeds to pay off the shared debt. 

If you are married and potentially face filing for bankruptcy, you should retain a knowledgeable bankruptcy attorney to ensure that you understand your rights and responsibilities. For a free consultation with an experienced and skilled bankruptcy attorney, contact The Law Office of Carla Jones at (786) 378-8246.