Money problems account for one of the biggest reasons that couples divorce in Florida. When one spouse has debt or poor credit, it can hamper the financially stable spouse. This is true even when the stable spouse has excellent credit and makes good money. When this gets out of hand, one spouse may consider filing bankruptcy to start on a new slate and better contribute financially to the union.
This begs the question of how that decision may affect the other spouse. Does the stable spouse face the possibility of losing her or his assets? Will his or her credit get negatively affected? These are just some of the questions the couple may have.
Debt liability and equitable distribution
NerdWallet, a personal finance company, notes debt liability between couples comes down to the state. Community property states, for the most part, treat all debts and assets incurred in the marriage as joint assets. This means that the financially stable spouse may risk losing some of their assets as well.
However, Florida and most other U.S. states are common law or equitable distribution states. In these states, joint ownership of debts and assets mostly comes down to whose name is on the debts and assets. Jointly owned homes, for instance, may get drawn into bankruptcy proceedings, while individually owned vehicles may not.
Ruined credit history
In the case of jointly owned assets getting wrapped up in bankruptcy proceedings, this may lead to a blemish on the other spouse’s credit history. What some couples do to preempt this is to attempt to refinance before filing for bankruptcy. This may allow one spouse to keep the home or vehicles in both spouses’ names. A quiet title may also ensure that the filing spouse has no claims to the home.
However, couples need to consider whether this may or may not affect bankruptcy proceedings later on. The last thing they need is to look as though they are deliberately evading specific lenders or creditors.