Bankruptcy and Shared Credit for Married Couples

September 21, 2012

When people marry, they join all the aspects of their lives together to form a new union going forward. What many forget is that they also unite their financial situations and credit. People may not be aware of the different ways they can share credit with a spouse, the benefits and drawbacks of shared credit and how bankruptcy can impact shared credit.

Types of Joint Credit

People tend to use the term "joint credit" rather loosely, using it to reference a variety of shared credit situations. There are three main ways that people can share credit:
-Joint credit: where each party is a full partner on the account and signed an application for credit
-Co-signer: where a person agrees to be responsible for credit that is in someone else's name; the co-signer is not allowed to use it and often cannot access information about the account
-Authorized user: where a person is allowed to use the credit that is solely in another person's name but is not responsible for repayment


Benefits and Drawbacks of Joint Credit

People should understand that all of the credit they share with their spouses will appear on their credit reports as if it were only theirs. Sharing credit with a spouse can be very beneficial if the spouses have a joint account with a high limit and do not use it often or pay the bills on time when they do use it. The positive payment history and lines of credit will increase each spouse's credit score.

However, there can be drawbacks to joint credit, as well. Joint credit holders are responsible for the entirety of the bill, not just 50 percent. So if one spouse amasses a great deal of debt on the joint account or misses payments, it will affect the other's credit just as much the one who ran up the debt.

Even if one spouse just co-signed credit for the other spouse, the co-signer's credit score is damaged if the other spouse does not repay what he or she borrows.

Joint Credit and Bankruptcy

If one spouse decides to file for bankruptcy, the protections that bankruptcy offers consumers, such as the automatic stay and debt discharge, do not always apply to joint credit accounts. If the spouse is filing Chapter 13 and fully intends to repay the debt, then the protections apply. However, in other cases when one spouse files bankruptcy, creditors on shared accounts will pursue payment from the other spouse.

Talk to a Lawyer

Making the decision to file bankruptcy can be difficult and some of the information available on the subject can be confusing. If you are considering bankruptcy and have questions about how it will impact your spouse and his or her credit, speak with a qualified bankruptcy attorney who can advise you of the options for debt relief available to you.

Article provided by Law Office of Eric K. Fox
Visit us at http://www.erickfox.com