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How Will Bankruptcy Affect my Spouse?
Milwaukee Bar Association

When we file for any chapter of bankruptcy for our clients, we need to know if they are married (or divorced, or separated).  Why?  Because the act of filing bankruptcy creates an “estate”.  The estate is everything you own, everything you’re entitled to, and all of your debts.  The goal of the bankruptcy is to close the estate by eliminating most of those debts through a Chapter 7 discharge or repaying them through a plan. In a Chapter 7, most everything owned is protected, or “exempted” from the creditors, with the rest being sold to pay the creditors.

Wisconsin is a community property state.  That means you own a half interest in all of your spouse’s property with very few exceptions.  So if you’re married, what’s his (or hers) is yours, and what’s yours is hers.  Even if you want to file an individual bankruptcy and leave your spouse out of the mess, you still are going to have to tell the courts everything your spouse owns, everybody they owe money to, and how much income they make.  Those are all fair questions and it can mean that in odd cases, your spouse’s assets might have to be turned over to the courts. 

If you and your spouse live thousands of miles apart and haven’t spoken in over 10 years, that might be a different story.  In that case, you may truly be deemed separated, even if nothing was filed in a court to make it official.  But couples are part of a unified whole, and are treated that way in bankruptcy unless there are weird facts. 

While your bankruptcy won’t show up on your spouse’s credit report, our general advice is that we usually recommend couples file their bankruptcy together if each person is eligible.  At the very least, spouses should have complete knowledge and understanding of what their spouses plan to do, because a bankruptcy can affect both parties. 

Ryan Blay
6905 Green Bay Rd., Suite 101
Kenosha, Wis., 53142
phone: (262) 694-7300
fax: (262) 694-7301

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