Free Consultation
The office is open as per the NYS Covid-19 guidelines. We are now doing both in-person and telephone consultations. Please call the office at 718-855-6840 to schedule a time to speak with one of our experienced bankruptcy attorneys.

Does Bankruptcy Affect a Non-Filing Spouse’s Credit?

Sometimes New York bankruptcy debtors don’t file with their spouses, but when they do they (or their spouses) wonder how the bankruptcy will affect their non-filing partner’s access to credit or FICO scores. It’s an understandable sentiment because credit scores are both important and not important: It’s good to have high ones, but one’s life isn’t ruined if it’s mediocre or even slightly less. Debtors with low credit scores probably have bigger problems than whether they can open a new credit line. So how does a bankruptcy affect a spouse’s credit score?

Short answer: It doesn’t.

The longer answer: It can if the spouses co-signed any debts in the bankruptcy, but it shouldn’t.

For the most part, debtors asking this question are concerned that the credit-reporting agencies subtly apply their bankruptcies to their spouses’ credit scores. Fortunately, there isn’t a trick in the FICO formulas that punish spouses for filing bankruptcy.

When the spouses co-own debts, however, then bankruptcy can affect their credit scores. A debt is jointly held if both spouses signed the credit-card applications or financing agreements. For credit cards, sometimes one spouse signs the agreement but orders a card in the other’s name. In these circumstances, the non-signing spouse is not a party to the account, so his or her credit score won’t be affected if that account goes into bankruptcy, so debtors and their partners need to know which situation they’re in. (Actually, all this is true for non-married people too.)

The reason non-filing co-signers should be alert is that sometimes the creditor will note that the debt is in bankruptcy, and then the credit-reporting agencies will apply this notation to both spouses’ credit scores. Whether this notation actually affects a credit score is a separate topic. However, one course of action non-filing spouses can take to remedy this is contacting the credit-reporting agencies directly and disputing the notation. The possibility that there’re errors or adverse notations is a compelling reason for non-filing spouses to order their own credit reports before or during their spouses’ bankruptcies.

Co-signers should also be aware that a debt discharged by their partners does not do so for themselves and that they are obligated to keep the debts current. Obviously, after the bankruptcy the debtor can help the non-filing spouse repay the debt, but there is no legal obligation to do so.

If you are considering filing bankruptcy and want to ensure that your spouse’s interests are protected, then talking to an experienced New York bankruptcy lawyer can help you strategize your best course of action.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Beware Grace Periods, Debtors

Too often, debtors see grace periods offered by lenders as free benefits. “Grace” makes it sound so innocent. However, debtors who routinely rely on grace periods when making payments will find themselves facing financial difficulties that might lead to bankruptcy. The reason is that although creditors offer grace periods to debtors, they also use them

Read More »

Bankruptcy May Not Rescue You From Vicious Personal Disputes

Bankruptcy is a technical process that assumes everyone working within it is mostly rational. To the extent that it expects parties to deviate from irrational behavior, the Bankruptcy Code and its accompanying rules include incentives to keep parties in line. Creditors are usually large and impersonal, and they rarely care if their debtors file bankruptcy.

Read More »

Non-Lawyers’ Explanations of Bankruptcy May Be Wrong

Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.” Although many bankruptcy lawyers

Read More »

6 Steps to Take Before Filing Bankruptcy

Leaving your case to an experienced New York bankruptcy lawyer is not the only step on the to-do list before filing bankruptcy. There are many things debtors should do (and not do) before they file, and the more organized and mindful debtors are, the easier the process will be and the more effective the result.

Read More »

Social Security Number Not Necessary for Bankruptcy

A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy

Read More »

How Can a Debtor (or Creditor) Get a New Trustee?

The trustee in a New York bankruptcy case is usually not the debtor’s ally. His or her purpose is mainly to administer the bankruptcy estate or ensure the debtor’s repayment plan goes according to plan. Trustees pursue preference payments, fraudulent conveyances, and other malfeasance committed by debtors. They frequently initiate adversary proceedings against debtors. In

Read More »
Scroll to Top