While every couple has a different size wedding, getting married can involve a lot of pressure. Between finding a venue, mailing out the invitations, paying for the wedding, and interviewing multiple vendors – it’s stressful. When you add money problems on top of it, it brings “stress” to a whole new level.
When couples fall in love and decide to marry, they’ll often put thought into their fiancé’s financial situation, and understandably so. In fact, it’s financially savvy to consider a future spouse’s income, debt, and credit score – because it will directly affect that person once they marry them.
What if one fiancé has a lot of debt and they are considering filing bankruptcy? Is it better to file bankruptcy before or after the wedding? It depends on the debtor’s financial situation, and whether their fiancé wants to file too.
Chapter 7 and Chapter 13 Bankruptcy
Most debtors file a Chapter 7 or Chapter 13 bankruptcy. With Chapter 7, many unsecured debts are “erased,” such as medical debt, credit card debt, personal loans, and utility bills. However, other debts, including student loans and recent taxes cannot be included in Chapter 7.
Chapter 7 is for low-income debtors – think unemployed or underemployed individuals. Chapter 13 is for debtors who have a regular job and a decent source of income; these debtors can pay all or a portion of their debts eventually.
With a Chapter 13, the debtor pays off their debts over a 3 to 5 period. A Chapter 13 is also the bankruptcy people usually file if their home is threatened by foreclosure and they want to save it.
Bankruptcy Before or After Marriage
So, how does bankruptcy affect people before and after marriage? If a debtor files a Chapter 7 or 13 and discharges it before the marriage, their spouse’s finances are not touched. This means their spouse’s property won’t be used to pay off the person’s debts.
In contrast, when a spouse files bankruptcy after marriage, it is possible that their spouse’s property will be used to pay off their debts, especially when they comingle their assets. This is definitely a concern in community property states, such as California and Nevada.
Protecting Your Spouse When Filing for Bankruptcy
If you decide to file bankruptcy after you get married, there are steps you can take to protect your spouse if he or she does not file bankruptcy with you.
How to protect your spouse if you file bankruptcy after the marriage:
- Do not comingle funds (no joint bank accounts).
- Do not take out any loans in both of your names.
- File your taxes separately.
- Consider drafting a prenuptial agreement that addresses what assets and debts will remain “separate property” after the marriage.
- Speak to a bankruptcy attorney about whether you should file bankruptcy before or after you get married.
If you are engaged to be married and you’re concerned about your debt or your fiancé’s debt, this is a good opportunity to have you both sit down with a Harrisburg bankruptcy attorney from our firm. Do it now, before money becomes a source of trouble in your marriage.