A marriage is a legal union that creates joint responsibilities for both spouses. There can be prenuptial agreements in place that protect pre-marriage property, but marital property is the responsibility of both spouses. Some people think that their responsibility for martial property expires when they get divorced. But if their ex-spouse goes bankrupt, then they find out quickly that marriage can be forever, even if the couple is divorced.
Can My Ex-Spouse File Bankruptcy?
In most cases, ex-spouses cannot tell each other how to live their lives when the divorce is final. There are cases when the divorce decree outlines specific situations where ex-spouses must check with each other before they take certain types of actions, but that is rare. Marital debt, that is debt accrued while the couple was married, is usually divided up by the divorce decree. But that court order cannot take precedent over a bankruptcy filing.
What Am I Responsible For?
If your ex-spouse files for bankruptcy and you are a co-signer on any loans or credit card accounts, then you will probably become liable for the full amount of all of those loans and accounts. If your ex-spouse filed a chapter 7 bankruptcy and those debts were discharged by the courts, then the co-signer becomes responsible for those debts. That means those debts become your responsibility.
Filing Chapter 13
A chapter 13 bankruptcy is different than a chapter 7 because debts are not discharged in a chapter 13 bankruptcy. Instead, the courts put together a repayment plan that the filer must pay directly to the court each month. In this case, the filer is completely responsible for all debts in their name and the ex-spouse is not. However, a creditor might sue the ex-spouse if it is unable to get back all of its money from the court-administered payment plan.
In any form of bankruptcy, the primary residence of the filer is usually considered exempt. This means that, no matter what happens in the bankruptcy, the primary residence is not touched. However, if there is property that is jointly owned by two ex-spouses and one spouse goes bankrupt, then the courts will liquidate the property. Once the property is liquidated, the courts will use the filer’s half to pay off their debts and give the ex-spouse their half in full. The ex-spouse will have their cash, but they will no longer own the property.
If your ex-spouse goes bankrupt, then that means that you could be on the hook for any accounts that you were a co-owner. Bankruptcy can take months to complete, which means that the two ex-spouses may have to be in contact for a while until the process is over.