Dorothy Lawrence’s Bankruptcy Guide for Couples
Bankruptcy is something that terrifies people. Filing for bankruptcy is one of the hardest decisions people make. This decision-making becomes even more difficult when couples file for bankruptcy. There are so many variables to consider, and most couples are often stuck in the decision-making phase. Well, Dorothy Lawrence wants to make it easier for couples by guiding them. Dorothy Lawrence is a well-known Texan bankruptcy lawyer. She runs her own firm, the Dorothy Butler Law Firm, in Dripping Springs, Texas. According to Dorothy, here are the most important things couples need to know and consider before filing for bankruptcy.
Is Marital Debt Joint or Individual?
Just because couples are responsible for taking care of each other doesn’t mean one partner’s debt should be a burden on the other, says Dorothy. The general rule of thumb, Dorothy says, is that debt belongs to the spouse who has incurred it. If you or your partner co-signed for each other or have a joint credit card account, both of you will be equally responsible for repaying the debt. However, if you live in Texas (or any of the other community property states), this is not necessarily the case. The debt acquired during the marriage is community debt. If both spouses do not file together, there is some risk that creditors will go after the other spouse for the debt incurred during the marriage.
Filing Jointly Vs. Filing Individually
Filing for bankruptcy can affect a couple’s relationship, which is exactly why it is so hard on them. A couple going through bankruptcy can use either file individually or jointly. The upside to filing jointly is that it can lessen the burden of filing fees, court costs, and other expenses on you. People usually assume that marital debt is shared; however, Dorothy says that’s not always the case. It is often the case that only one of the partners is in debt. That’s why one partner may file for personal bankruptcy. The important thing to remember, says Dorothy, is that filing for personal bankruptcy can affect your partner. It can affect him/her psychologically, legally, and financially. That’s why you have to make such decisions very carefully.
Dorothy recommends that couples living in a community property state file together for bankruptcy. If the spouses do not file together, they run the risk that one will go through bankruptcy, and then creditors will come after the other spouse. It may also increase their limit and possibly qualify them for certain bankruptcy exemptions.
The Consequences of Filing Bankruptcy
It is important for couples to know how bankruptcy can affect their spouses, says Dorothy. In some situations, such as filing before getting married, one partner filing for bankruptcy may not affect the other partner’s credit. This is true only in cases where there are no joint accounts. However, if there are joint accounts or the couple has co-signed on credit cards or loans, it may harm your partner’s credit. If you and your partner do not have any joint accounts and you file for bankruptcy before getting married, it won’t affect your partner’s credit report. In most cases, Dorothy says, that’s unavoidable because it’s practically often not possible to keep finances separate.
Dorothy recommends making sure that your partner’s credit score is not affected when you file for bankruptcy. Since it is very hard to determine whether the partner’s credit score will be affected or not, you should always consult with a bankruptcy lawyer. The Dorothy Butler Law Firm can be of great help in this regard.
Chapter 7 Bankruptcy Vs. Chapter 13 Bankruptcy
Another important thing couples need to take into account is whether they should file for chapter 7 bankruptcy or chapter 13 bankruptcy. Chapter 7 bankruptcy requires couples to pass the “means test,” and it involves the liquidating of their assets. Chapter 13 bankruptcy, on the other hand, doesn’t involve liquidating assets, but it can affect your credit score more.
Is It Better to File for Bankruptcy Before Getting Married?
Since a lot of couples wait for years before getting married while living together, bankruptcy becomes a hard decision. Couples are confused about whether they should file for bankruptcy before or after marriage. Dorothy recommends filing for bankruptcy before marriage because there are fewer chances of damage to your partner’s finances in this case. Further, Dorothy strongly recommends filing before marriage if you are filing for chapter 7 bankruptcy.
