You can file for bankruptcy protection without your spouse also being named as a debtor. However, the bankruptcy will not protect your spouse against liability for debts for which you are jointly liable.

New Jersey is a common law state, which means that each spouse owns a share (most likely one-half) of the jointly held property. If you file for bankruptcy, all the non-exempt property you own individually plus your share of the non-exempt property you own jointly with your spouse becomes part of your bankruptcy estate. Any property owned individually by your spouse is not part of your bankruptcy estate and cannot be used to satisfy your creditors.

In a Chapter 7 proceeding, if the trustee cannot divide the non-exempt property you own jointly with your spouse, the property may have to be sold to raise cash to pay to creditors. The trustee then will have to pay your spouse his or her share of the sales proceeds and your spouse will no longer own a share of the property.

The automatic stay that takes effect upon filing a Chapter 7 petition precludes your creditors from continuing their collection efforts against you during the bankruptcy. However, if you have joint debts with your spouse and your spouse is not a party to the bankruptcy, the stay does not apply to him or her. Creditors can continue their collection attempts against your spouse, who remains jointly liable for the entire debt.

At the successful conclusion of a Chapter 7 bankruptcy, the court discharges your individual debts. If there are balances owed on any of the debts held jointly with your spouse, the creditors may seek repayment of the entire balance from your spouse, since the discharge only applies to you.

In a Chapter 13 proceeding, the automatic stay against creditors also applies to cosigners of consumer debt(s) in the bankruptcy estate. Creditors can try to void the codebtor stay if the actual beneficiary of the debt was the codebtor, if the Chapter 13 repayment plan does not provide for repayment of the debt or if the creditor’s interest would be ruined beyond repair.

Upon completion of the repayment plan and the discharge of debts in your favor, if any of the joint debts remain outstanding, the codebtor will be responsible for the entire remaining balance.

Initially, the fact that you file for bankruptcy should not impact your spouse’s credit score. However, if there are joint debts, your bankruptcy filing may appear on your spouse’s credit history.

If you are considering seeking bankruptcy protection, talk to an attorney at the Law Offices of James C. Zimmermann. Arrange a free attorney consultation by calling 973-764-1633  or contacting us online. Our offices are conveniently located in Hackensack, Vernon, Wayne, Pompton Lakes and Nutley, New Jersey.