Many people wonder what effect their spouse’s prior bankruptcy will have on them and their relationship. First and foremost it is important to remember that these people are not, “deadbeats”. Unexpected illnesses, job losses and underwater mortgages are all common reasons for filing bankruptcy. With 46% of Jacksonville homes under water, there are at least half a million Jacksonville residents with a good reason to file bankruptcy.
It is also important to consider how long ago their bankruptcy filing occurred. A bankruptcy stays on a debtor’s credit history for ten years, but is only supposed to have an effect for seven. If your fiancé filed for bankruptcy several years ago, the bankruptcy may have no effect on your new credit relationship at all. However, if the bankruptcy was recent, it is possible that it could effect your ability to purchase a home as a couple with a prime rate mortgage.
While it’s not something most people want to think about, your spouse’s prior bankruptcy may limit your own options were you needing to file a bankruptcy. 11 U.S.C. 727 prevents a debtor from getting a discharge in Chapter 7 if they had a previous discharge in a case that commenced within eight years of filing the new petition. Or, in the case of Chapter 13, a case that commenced six years before the date of filing the new petition unless they paid 100% of the claims in the old case or paid at least 70% of the claims in that case and proposed it in good faith with best efforts.
What does this really mean? You won’t lose your independent right to file bankruptcy by virtue of your spouse’s prior filing, but if you think there’s a remote chance that you might need to file bankruptcy with your spouse within eight years of the end of their prior bankruptcy, call a consumer bankruptcy attorney and see what the facts are. It’s possible that your prior spouse filed a case, but didn’t get a discharge. If that’s the case, it may not have an effect on either of your rights in bankruptcy going forward. If you’d like to speak with me about this issue or would like to schedule an appointment to review your options in bankruptcy, please call us at 904-685-1200.