When facing debt challenges, you may wonder if it is possible to file for bankruptcy without having to include your spouse in the process. After all, it is understandable to want to protect your partner from unnecessary difficulty or financial harm.
To navigate these circumstances, it is important to carefully review the effects of individual bankruptcy on your spouse.
Individual bankruptcy filings
In South Carolina, spouses have the option to file for bankruptcy individually. This means that one spouse can initiate the bankruptcy process without involving the other. However, there are still potential implications for both people.
Joint debts
While one spouse can file for bankruptcy independently, joint debts are a shared responsibility. If both spouses are legally obligated for a particular debt, the non-filing spouse may still be accountable for the repayment, even if the other spouse files for bankruptcy.
Chapter 7
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves the sale of non-exempt assets to settle debts. If one spouse chooses this route, it may not directly impact the non-filing spouse’s credit score, but joint debts and exempt assets are often affected.
Chapter 13
Chapter 13 bankruptcy involves a repayment plan, allowing the debtor to reorganize their finances and repay creditors over time. In this scenario, the non-filing spouse is generally not directly responsible for the repayment plan. However, joint debts may still be subject to the bankruptcy proceedings.
Separate property
The state’s legal framework focuses on ensuring a fair division of shared property. Limited direct influence on property results when an individual opts for bankruptcy filing independently. This is especially true if the property is solely owned by one spouse and not entangled with joint debts.
Reduced access to credit
Be aware that lenders may view the non-filing spouse as a higher risk due to the potential financial strain resulting from joint debts or a reduced household income. This could lead to higher interest rates or difficulties in obtaining new credit.
With bankruptcies on the rise, you are not alone if you are facing this challenge. It can be comforting to know that filing independently is a viable option, as long as you give careful consideration to the impact on your spouse.