If I am married, but I am the only one with credit card debt and my spouse has perfect credit, do we both have to file?

I get this question a lot.  Especially at the point at which a couple decides that it is time to purchase a home, but one spouse has perfect credit while the other has far from perfect credit.  When purchasing a home, it’s more beneficial that both spouses have good credit so that you can obtain the best rates possible. So do both spouses have to file the bankruptcy?  Yes.


The reason is this, California is a community property state.  So, even if one spouse opened all their credit cards that are in default prior to marriage, discharging the personal liability of that spouse of the debts does not mean that spouses share of the community property is also discharged.


Here is an example.  Let’s say Wife has $30K of credit card debt she obtained prior to marriage.  She gets married to Husband, who already had a home.  Husband puts Wife’s name on the property and they begin to pay the mortgage on the property.  The home goes up in value and now they have $60K in equity.  The couple would now like to upgrade and sell their current home to purchase a larger home in anticipation of having children.  Unfortunately, Wife’s credit score is very bad because of her past debt.  Wife decides to file a Chapter 7 bankruptcy herself to get rid of her debts.  (NOTE: although her husband’s not filing, his income will be counting toward whether she qualifies for a Chapter 7 bankruptcy as they are one household).  Wife successfully finishes her bankruptcy and receives a discharge.  A few months later, Husband gets a call demanding that 50% of the community assets prior to Wife’s bankruptcy is liable to the debt.  This means, the creditor is entitled to 50% of the equity in their home, which equals $30K.


It seems unfair, but unfortunately that is what happens when a married person files bankruptcy by themselves.  There are ways to avoid this happening to you, but the best thing to do is consult with us and the sooner the better.  Meaning, if you know you have a debt issue, consult us prior to getting married so that you can put your future life with the love of your life in the best position possible.

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