Married couples can file Chapter 7 or Chapter 13 bankruptcy together or separately. Understanding the impact of liability for the non-filing spouse is an important consideration before filing. A bankruptcy attorney who knows Illinois bankruptcy laws can provide legal advice for filing bankruptcy without a spouse.
In Illinois, the filing of a Chapter 7 or Chapter 13 bankruptcy will immediately stop your creditors from taking legal action against you. Once a bankruptcy is filed, an automatic stay goes into effect that stops creditors from attempting to collect money from you through foreclosure, repossession of assets, wage garnishments, and harassing phone calls. However, filing an individual bankruptcy may still impact both spouses.
Illinois Bankruptcy Laws
Illinois is not a community property state, but bankruptcy laws look at joint debt. When filing an individual bankruptcy, joint debt can impact the non-filing spouse. If the non-filing spouse has cosigned on a debt, such as a house or car, he/she is still responsible for payment of the debt and the bankruptcy will not discharge or eliminate that spouse’s liability. The same rule applies to personal loans, credit cards, and any other joint debts.
In Illinois, both spouses may be responsible for certain debts under the Family Expense Act. If debts were incurred during the marriage, filing an individual bankruptcy may not eliminate a non-filing spouse from financial liability. Under this act, husband and wife are jointly responsible for family expenses and debts such as medical, hospital, and funeral costs.
Filing an Individual Bankruptcy Petition
If husband and wife share the same household, a non-filing spouse’s income must be included in a Chapter 7 or Chapter 13 bankruptcy petition. It’s possible that including this income in the petition may hinder eligibility for a Chapter 7 or unreasonably inflate the payment plan for a Chapter 13. When filing alone, a bankruptcy attorney will need the spouse’s income for the past six months to calculate total household monthly income. This will be used to figure debtor income according to the means test.
- A non-filing spouse will need to complete a statement of his/her separate expenses. If income and expense information is not provided, additional documents will need to be filed.
- If spouses are legally separated, income information from the non-filing spouse is not required.
- When filing an individual petition, the bankruptcy will not appear on the non-filing spouse’s credit.