Does My Spouse Need to File Bankruptcy?

If you file bankruptcy, your obligation to pay your debts will be discharged or “wiped out.”  However, to the extent that your spouse owes any money, he or she will still be obligated to pay joint obligations unless your spouse joins you in the filing of your bankruptcy.  How do you know if your spouse needs to file?

EXAMPLE:  Cindy and John have a bunch of credit card debt, and because of a recent illness, they can no longer meet the minimum monthly payments.  John has one credit card with a $3,000 balance; Cindy has one credit card with a $1,500 balance; and they have four other “joint” credit cards with a combined $42,000 balance.  Should they file a joint bankruptcy or should just one spouse file?

ANSWER:  Sometimes joint obligations are hard to recognize, and just because a debt appears on both Cindy and John’s credit reports does not mean that it is a true joint obligation.  The real question is who agreed to be liable for the debt.   If Cindy and John each have a credit card with the same account number appearing on it, they may both be obligors, or one may be a “permissive user.” 

Scenario 1:  In this case, let’s assume Cindy got these four credit cards before she married John, and after their marriage, she contacted the banks to add John to her credit card accounts.  John, then, is a permissive user, and he is not legally obligated to pay these banks.  Cindy should file bankruptcy alone because John really owes a total of only $1,500 in credit card debt.

Scenario 2:  Let’s now assume that Cindy and John actually filled out a joint credit card application for one of the credit cards with a $20,000 balance.  They are joint obligors, and they both need to file bankruptcy to discharge all that debt.

Scenario 3:  Finally, let’s assume the same facts as in Scenario 1 above, but now let’s also assume that Cindy had an extended hospital stay.  She was very ill when she was admitted, and John checked her in.  When doing so, he signed a financial obligation form which personally obligates him to pay the hospital bill, which now has reached $15,000.  Even though he is not obligated to pay back Cindy’s credit card debt, he is on the hook for her medical treatment.  Before he decides to join Cindy in her bankruptcy case, John may choose to discuss repayment options with the hospital.  In many cases, a hospital will be extremely flexible with a repayment schedule and offer repayment at no interest.  Of course, if John files bankruptcy with Cindy, this hospital obligation will be discharged right along with the credit card.

Most people do not remember whether they signed a joint application for credit with their spouse, so if there is any question, it is vital that potential debtors contact their credit card companies requesting a copy of the signed credit application.  Remember, this is a joint obligation only if both spouses signature appears on the application. 

See also How Do I Read A Credit Report?

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