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Ask Dr. Don

Will bankruptcy affect my husband?

Dear Dr. Don,
I have about $16,000 in credit card debt. We moved from California to Atlanta. I had a cleaning service for 11 months. I've only earned $400 since moving to Atlanta. Taking care of my grandson here has been a hardship for me financially. I am considering bankruptcy. The credit cards are in my name with extra cards for my husband. My question is, if I file bankruptcy, will it affect my husband? We rent now but would like to buy a house in the next six months. Will this affect us?
Thank you,
Barbara Bankruptcy

Dear Barbara,
Your situation is further complicated by having moved from a community property state to a non-community property state. The community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. You and your spouse may both be responsible for debts incurred during the marriage while living in a community property state, and the individual debts of one spouse may appear on the credit report of the other.

Even in a non-community property state, when you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse's name as well as in your name if the account was opened after June 1, 1977.

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This means that regardless of your husband's legal obligation to repay these debts, your bankruptcy will show up on his credit report(s). If you file a Chapter 7 (liquidation) bankruptcy and your husband is responsible for any of these debts, because they were incurred while you lived in a community property state, your creditors can look to him for repayment. In that case, a joint bankruptcy petition is likely to make more sense than you filing an individual bankruptcy petition.

You need to hire a bankruptcy attorney to advise you. Whether that attorney should be in California or Georgia depends on which bankruptcy court has jurisdiction.

According to Auntie Nolo at Nolo.com, "You must file bankruptcy papers in the judicial district where you have lived for the greater part of the previous 180 days. If you want to file sooner than that, you must file in the judicial district from which you moved."

The U.S. Courts Web site provides a map showing the judicial circuits. The site also has an electronic pamphlet, Bankruptcy Basics, which is required reading if you're considering bankruptcy.

Your lack of current income and impending credit history after filing for bankruptcy won't help a joint loan application. Your husband's ability to qualify for a mortgage will depend on his income level and credit history. His obligations to repay these debts, and their effect on his credit history and credit score, will influence the mortgage rate he is offered on a loan.

-- Posted: Jan. 26, 2004

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See Also
Bankruptcy not a matter of convenience
Will my husband's bankruptcy affect me?
Financial advice glossary
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