Your wife cannot file a Chapter 7 bankruptcy, include your debts, and eliminate those debts that are only in your name. Your wife can file a Chapter 7 bankruptcy and eliminate all the debts in her name, but the accounts in your name will still exist after the bankruptcy is over.
If you choose this approach, then the success of your bankruptcy will depend on the state in which you live. For example, in community property states. such as California, you may still face lawsuits and judgments even if your name is not on any of the credit cards. In California, it is not uncommon for a married individual to avoid filing bankruptcy and avoid judgments; however, some creditors aggressively go after the spouse when they learn that only one spouse filed for bankruptcy protection and the other did not.
The majority of states are not governed by community property law. In those states, it is possible for one spouse to file, eliminate the debts in his or her name, and continue paying on the other spouse's debts. The creditor should not have the right to sue the nonfiling spouse so long as both spouses did not sign on the credit card application.
There are reasons to file one person at a time. Read my previous column, "Filing bankruptcy one spouse at a time ," for some guidance.
Alternatively, one spouse can file Chapter 13 bankruptcy and include all credit card accounts. In Chapter 13, your spouse will have a monthly payment and all debts will be eliminated after the 36- to 60-month payment plan. However, be very careful with this approach, because you need to make sure that all creditors get paid the balance in full. If you try to include your bills, but only pay back a percentage of the debts over the course of the bankruptcy, then you could still be liable for
the bills after she completes her Chapter 13 bankruptcy plan.
Before choosing to file an individual bankruptcy, make sure you do not have your name on any credit card accounts with your spouse. Call each creditor and provide your Social Security number. This is the best way to determine whether you have accounts in your name. One common problem arises when a spouse calls to put the other spouse on an account as an "authorized user." This allows the nonsigning spouse to use the card, but not face potential liability when a default occurs.
It is very common for the creditor to ask for the nonsigning spouse's Social Security number. The number is provided and put into the creditors system. Once the creditor has both spouses' Social Security numbers, the creditor will sue the nonbankrupt spouse even without having a signature.
As a result, you will need to defend yourself in any future lawsuit by proving that you were nothing more than an authorized user and not personally liable for the debts. This could cost you more than you owed in the first place, because you will need to fight the creditor in court. You will need to file a timely answer to the lawsuit or else the creditor will get a default judgment against you. This could end up making the bankruptcy filing a complete waste of time and money because you could still get stuck with a judgment.
Prior to filing, even if you file without an attorney, I would suggest discussing your specific situation with a local bankruptcy attorney. Most attorneys do not charge for the initial consultation, but this will provide you with valuable insight into your specific case.
Justin Harelik is a practicing attorney in Los Angeles. To ask a question of the Bankruptcy Adviser go to the "Ask the Experts " page, and select "bankruptcy" as the topic.