If you’re considering bankruptcy, you may be wondering how bankruptcy will affect your spouse. Depending on the circumstances involved, bankruptcy can affect your spouse financially. In most cases, however, your debts are yours alone, unless your spouse has co-signed or guaranteed your debt. For example, if you are both joint-debtors on an account (i.e. your mortgage), then bankruptcy will affect both of you jointly.
Certain collection agencies may threaten that they will go after your spouse for payment on a debt. This is a commonly used scare tactic. In most cases, collection agencies can only pursue payment from the person who holds the debt. Your spouse cannot be held liable for a debt unless it is a joint-debt, or your spouse was a co-signor for the debt.
If you have no joint debts, then one spouse’s bankruptcy will have no effect on the other spouse’s credit score. However, due to the bankruptcy, the spouse who filed for bankruptcy may not qualify as a co-signor in the future. This means that bankruptcy can have indirect effects on your spouse in the future. If your spouse has a supplemental credit card (an additional credit card on your account), this is another situation where your spouse can be affected by your bankruptcy. If your spouse has a credit card with their name on it, and if they have used the card, then they are responsible for the entire credit card debt.
Bankruptcy can also affect your spouse in non-financial ways. The emotional and mental distress of bankruptcy can be significant. Watching a spouse lose most of their assets and go through bankruptcy can be a very emotionally draining experience. When you file a bankruptcy petition, your spouse may begin to worry about what other people will think of them. Loss of reputation and concern over social status is something that certain spouses may experience.