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If you’re in over your head financially, you may be wondering how discharging debt through bankruptcy will affect your spouse. Naturally, every situation is different, and only a seasoned attorney can explain what might happen after evaluating the circumstances. In general, though, here’s what you should know about how declaring bankruptcy could affect your family’s financial security.

How Bankruptcy Could Affect Your Family’s Assets

bankruptcyAlabama is a common law property state, which means your bankruptcy estate is comprised of only your own assets and those that you own jointly. In other words, if you declare Chapter 7, any property that is solely in your spouse’s name will not affect the proceedings or be vulnerable to liquidation; however, the bankruptcy trustee may be able to liquidate 100% of a jointly owned asset. In such a scenario, your spouse would receive funds for his or her portion of ownership, and the rest would go to creditors.

How Bankruptcy Could Affect Your Family’s Debts

Bankruptcy will have no bearing on your spouse’s financial obligations when it comes to joint debts. Although you may no longer be liable for certain joint debts once the proceedings have ended, your spouse still will be. This, in turn, could affect his or her credit in an indirect way. While everyone retains their own credit history even after getting married, discharges for joint debts are typically reported for all borrowers’ files. That means certain components of the bankruptcy could appear on your spouse’s credit report. And, if he or she is unable to make the minimum payments as the sole debtor, it will also affect the score.

 

If you want to file for bankruptcy in Alabama, turn to the lawyers at Pearce Law Firm for guidance. With offices in Foley, Bay Minette, Gilbertown, and Atmore, this firm assists clients with bankruptcy filings and criminal defense. Led by Allyson Pearce — who has over 15 years of experience providing debt relief services — they can help you regain your financial footing. To find the office nearest you, visit their website, or call (251) 301-8250 to schedule a consultation in Foley.

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