How Marriage Affects Bankruptcy
Posted on Monday, May 11th, 2015 at 2:06 pm
At Lawrence & Associates, our bankruptcy attorneys deal with a lot of bankruptcies that come at the same time as a marriage or divorce. Many Northern Kentucky residents find that they either want to get rid of debts before they get married (often to avoid affecting the other person’s credit), or find that their debts become overwhelming following even the most amicable and fair divorce. In this post, we will talk a little bit about how an upcoming marriage can affect the filing of a bankruptcy.
Wedding Bells and Bankruptcy – What You Should Know
One of the questions we get asked most often at our Fort Mitchell, Kentucky office is whether a bankruptcy should be filed before or after the couple gets married. Generally, the concern is that getting married will somehow make the other spouse responsible for the indebted spouse’s debts. We’ll deal with two scenarios: one in which both spouses-to-be are indebted and need to file bankruptcy, and one in which only one spouse is indebted and needs to file.
First, let’s assume both of the soon-to-be married couple both have an avalanche of debt and both require bankruptcy. In that instance, it will usually make sense for the couple to get married before filing. First, a married couple only has to pay one court filing fee and one attorney fee, so the cost of filing is cheaper. Second, in both Kentucky and Ohio, all bankruptcies – regardless of whether they are Chapter 7 or 13 – require all household income to be listed. (This information helps determine whether you can file a chapter 7 or a chapter 13, and also how much a payment in a Chapter 13 will be.)
Therefore, an engaged couple in the same household is treated the same as a married couple when household income is taken into consideration. It would be rare that an engaged couple would want to file separate bankruptcies before getting married, but that might be wise if: a) the couple lives apart, b) at least one qualifies for a Chapter 7 while living alone, and c) when the engaged couple combines incomes, it would force them into a Chapter 13. In that case, filing separately would allow the spouse with the Chapter 7 to get in and out of bankruptcy quickly, rather than being in the bankruptcy for three to five years. However, this involves a means test calculation and the means test is complex. We do not recommend that you do this without an attorney.
Next, let’s assume only one person has a lot of debt coming into the marriage, while the other person has very little debt. The second person may not need a bankruptcy, although the first might. The analysis changes very little from the first scenario. If only one person is filing, the fees and costs will be the same regardless of whether that person is married or not. There is still no change in household income based on marriage; rather, the court looks at whether the two people are co-habitating regardless of marriage. One of the biggest concerns voiced is that the partner without the debt does not want his or her credit affected by the bankruptcy. However, in Northern Kentucky and Greater Cincinnati, the courts will not require the non-filing spouse’s social security information on the bankruptcy documents. Therefore, the non-filing spouse’s credit will not be affected by the bankruptcy. Just like in the prior scenario, the toughest question is for spouses-to-be who don’t live together before marriage. In that situation, an experienced bankruptcy attorney should determine whether moving in together will change the type of bankruptcy you can file.
Marriage Equality and the Supreme Court
At this time, same-sex couples are not allowed the right of marriage in either Kentucky or Ohio and therefore do not get the benefit of filing together. They do not get the cheaper filing rates of opposite-sex married couples, although the rules regarding household income are the same. The United States Supreme Court is currently considering this issue, so that rule may change. If so, we’ll update this blog in a different post to reflect that change.
Get Legal Advice to Prepare for Bankruptcy Before You Make Any Life Changes
There are still a few free lunches in the world. One is in the form of a bankruptcy consultation. When Lawrence & Associates does a bankruptcy consultation, we do not charge you or ask you to sign a contract. If you decide to retain us, you can do so at a second appointment or at the first, whichever you choose. We take pride in representing Northern Kentucky and Greater Cincinnati couples and helping them achieve a debt free future. If you are getting married and have questions about bankruptcy, please give us a call today!