Will a Bankruptcy Filing for Only One Spouse Affect the Credit Score of the Other Spouse?
NO. As an experienced Denver bankruptcy lawyer, I encounter countless situations where it makes the most sense for only one spouse to file . This is most likely because the other spouse simply has little or no unsecured debt, is ineligible to file if having filed an individual chapter 7 recently, or owns significant assets with equity which would no longer be exempt from the bankruptcy estate (and the reach of the trustee and unsecured creditors) if also added as a party to the petition.
A non-filing spouse is not responsible for debts help solely in the name of the spouse filing for bankruptcy. The credit rating agencies assign a credit score to each person (include each spouse in a marriage) and not to a family unit. So, if husband only files, the non-filing wife’s credit score will be unaffected.
The exception is that the non-filing spouse still remains potentially liable for any jointly incurred debts. So, if the filing spouse is protected by the automatic stay provisions of the Bankruptcy Code, guess who the creditor will be pursuing?
One situation I’ve been seeing more frequently in Colorado is where both spouses hold funds in a joint bank account, yet they owe a joint obligation to this same financial institution. (From the onset, I always recommend that anybody about to file for bankruptcy who holds a customer deposit account held at the same institution as where they owe money (such as a mortgage, car loan or credit card) immediately withdraw such funds prior to the bankruptcy filing as the financial institution will otherwise exercise its right to “setoff” (e.g. seize) the funds. A non-filing spouse will not have the right to seek reimbursement of funds taken from a jointly held bank account.