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Bankruptcy and Marriage – Should You Marry Someone Who Went Bankrupt?

Written by Neal Frankle - 12 Comments

Here’s a question about marriage and money that I recently received:

I have a question about marrying someone who will go through bankruptcy BEFORE marriage. Other than having difficulty with getting a loan, what other effects should I expect in the future?

The bankruptcy had to do with a prior divorce, and ownership of more properties than one should own at any one time, so I’m not worried about his spending habits. What do you think?

Bankruptcy and Marriage

This is a great question, and needs to be addressed from two different angles.

Everyday impacts

First, you each have your own credit history so his poor credit rating won’t impact your good credit score. Of course, if you apply for a loan together, his dark credit past is going to hurt you.

My suggestion here is for you to apply for big-ticket credit items like mortgages by yourself. You will get a better interest rate than if you apply with your fianc̩. But this leads to the second issue Рassets.

You may try to keep your assets separate and, as long as you do so, you might be okay. But you have to be careful. For example, if your sweetheart doesn’t discharge all of his debt, you wind up marrying into a financial mess. Let me explain…

Let’s say he ends up with a tax lien and the two of you file a joint tax return. In that case, the IRS is going to want it’s money before it gives you any tax refund. And debt relief from the IRS doesn’t come easy. Are you ready for that?

And the problem doesn’t end with tax liens. The same goes for things like student loans or government loans. You’ll also have to pay close attention to the laws of the State in which you live. This is especially important if you live in a “community property” state like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin.

Let’s say that you own your own home, but you commingle funds to pay expenses associated with the property. Your new husband helps pay the mortgage and utilities from your joint savings account, where he also deposits money.

The above fits the definition of commingling and, depending on the state in which you live, the property might then be considered partially his. If he hasn’t discharged all of his debts, his creditors could come after the property in that case. Not a good outcome for you.

This is why you might want to wait to tie the knot until his bankruptcy judgment is final. That way, you’ll know exactly what you’re stepping into. If your soon-to-be groom goes Chapter 13, he won’t discharge his debts. And even if he files Chapter 7 bankruptcy (which discharges most debt), not all debts are discharged.

After he’s been through the bankruptcy process, you’ll know which debts will be staying on the books. If you live in a community property state and he still has a lot of debt, you should definitely consult an attorney to determine if it’s possible to commingle while steering clear of risks associated his debts.

The bottom line is that it’s going to take this gentleman time to get out from under. That means the money he earns that should go toward building a future with you is going to his past creditors. Thus, even if everything else works out, you’ll be directly impacted by his debt problems for years to come.

Don’t forget the big picture

I would also recommend putting strict boundaries between your new husband and your own finances. With all due respect, this man has made some pretty serious errors in the past. Sure, divorces are devastating, and anyone who goes through one could end up in financial trouble. But the fact of the matter is that he wound up owning too many properties and he failed to plan for the future.

It’s fine to build a life with a wonderful person despite past indiscretions, but be very careful about letting him get to involved with your finances until he’s really proven himself. For example, he may be convinced that he’s got an unbeatable investment strategy but give it some time before you hand over any money.

One last thing… In case he doesn’t already know, you might want to ask him how his bankruptcy is going to impact his credit score. If he doesn’t already “get it,” encourage him to check it out himself.

What advice would you give this person?

If you were in her shoes, what would you do? Would you consider marrying someone who is going through extreme financial difficulties, up to and including bankruptcy?

Published on March 1st, 2011
Modified on October 4th, 2011 - 12 Comments
Filed under: Debt Reduction, Planning

About the author: is a Certified Financial Planner in Los Angeles whose goal is to help people improve their finances and find balance in life. He covers these topics at his personal blog Wealth Pilgrim.

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12 Responses to “Bankruptcy and Marriage – Should You Marry Someone Who Went Bankrupt?”

  1. 1
    BG Says:

    Look at the bright side — at least you are marrying someone with little or no debt, since they are going through bankruptcy.

    Its probably not uncommon for one (or both) spouses to file for bankruptcy after a divorce.

    As for going forward, expect all new loans (for a few years) to be in your name solely, due to the wrecked credit score of the soon to be groom.

    Try to put utilities and other such bills in the groom’s name (or both of your names) to start repairing his score.

    When I married my wife, she didn’t have a bankruptcy, but she had a pretty wrecked score (past due bills, etc), and it didn’t seem to affect much of anything. Now her score is higher than mine — heh.

  2. 2
    jim Says:

    I’d take a close look at his financial history and make sure you know what you’re getting into. He may have just ended up in a bad situation. But this bankruptcy may be the tip of the iceberg of a history of financial problems.

  3. 3
    Noadi Says:

    I agree to wait to get married until after the bankruptcy is finalized to know exactly how it’s going to pan out.

    Then you should proceed depending on WHY he had to file for bankruptcy. If he had a medical emergency and it was impossible for him to pay the bills or he was unemployed for an extended amount of time it’s different than running up tens of thousands of dollars in credit card debt on clothes and electronics or buying a home he couldn’t afford. In other words: a bad situation he had little or no control over but prior to that had a good financial history isn’t comparable to bad financial decisions and living beyond your means.

  4. 4
    sophomore Says:

    Nickel’s article contains the suggestion to consult an attorney – which I would highly endorse. I would go further and suggest a background check which can be completed online. The questioner has evidence of significant lack of judgment on the part of the future spouse. Does the questioner know ALL of ALL of the stories or just the parts that leaked out or were strategically revealed?

  5. 5
    Wende Says:

    I did marry someone that had a bankruptcy. He filed due to debt left over after a divorce. That said, most of that debt was due to living past their means, aka credit cards, and we agreed that I would be in charge of the money in our relationship. I also insisted on waiting to get married until a few years had passed, which wasn’t popular, but I wanted to protect my assets and credit score and make sure he was rebuilding his credit. I did eventually cosign on a car loan with him, and due to his bankruptcy, our interest rate was high (my excellent credit=5% on a loan, his credit=13% on a loan). So you can certainly expect that to be a factor. I still keep most of my finances completely separate from his, and I still control how our money is spent. We don’t always agree on financial issues, but my husband is grateful that I have helped him repair his credit. So I guess my advice would be to wait to get married until after the bankruptcy is finalized, and go in with open eyes.

    I will say that aside from the higher interest rates on loans, we didn’t encounter any other negative side effects from the bankruptcy.

  6. 6
    KC Says:

    I was in this situation… I had to file a ch. 7 BK as my ex-husband was not being responsible and left the house & 2nd mortgage on MY shoulders while he went and “played”. I tried to do the right thing, I tried w/o his help, to short sale the home… no luck. The bank was being a stinker.

    I found out he was maxing out his credit cards, etc and I just new it was going to end badly for me with that and the home so… I filed. I hated it I admit. My credit score was 800 before the divorce, but I felt I had NO choice. This way, my future and my future with someone else down the line will be cleared up and they won’t have to bear that burden of my past marriage.

    Yes, I have a derogatory mark on my credit, but eh.. my score is already back to 700 after being discharged in Oct 2010. I will say, I WILL be keeping my $$$ separate in any new relationship I might have. I learned my lesson the hard way.

  7. 7
    Kim Says:

    I am in the similar situation. The guy I am seeing told me honestly that he filed for bankruptcy under chapter 7 last year. Credit bills debts were due living out of means in his last marriage. He claims he is a changed person now. I am a person who lives in her means and debt gives me stress. I want to know the repercussions of marrying such guy. If we get loan after marriage in my name to buy some property because I would getting low interest and later for some unavoidable reasons we split up. What would be my financial responsibilities in that situation? I want to know all the issues I may face so that I am prepared for what I am going into. Any advise?

  8. 8
    Peaches Says:

    I married a single man who filed for bankruptcy but was too lazy to actually see it through. He did not show up for court to fully address this problem so his supposed “bankruptcy” came back to haunt us later when we applied for a mortgage to buy a home. Now, 10 yers later, he received a small inheritance following the death of his parents & he has already blown thru that as well. To top it off, he didn’t have enough withholding taken out at the time he received the funds so guess who got stuck with a huge tax bill on April 15? You got it. Would I do it agin? NO WAY! Live with the guy; just don’t mingle any of your finances together. Even without parents who left me anything, I’m still better off financially without him than I ever will be with him.

  9. 9
    Gottaknow Says:

    How will you know if he showed up for court and if everything is done???? My boyfriend said he went to court already and chapter 7 was filed but the lawyer keeps asking him to take additional paperwork to court such as W2s, bank statements?????? What is going on???? And can a single guy with no kids file chapter 7 when he has a good job????? Will there be a paper that says chapter 7 vs chapter 13???? PS…..background checks have served me worthless and a waste of $$$.

  10. 10
    Gottaknow Says:

    How will you know if he showed up for court and if everything is done???? My boyfriend said he went to court already and chapter 7 was filed but the lawyer keeps asking him to take additional paperwork to court such as W2s, bank statements?????? What is going on???? And can a single guy with no kids file chapter 7 when he has a good job????? Will there be a paper that says chapter 7 vs chapter 13???? PS…..background checks have served me worthless and a waste of $$$. ?

  11. 11
    KC Says:

    Well you CAN’T go to court unless ALL your ducks are in a row, if he has a good lawyer, they would prepare him for this. Yes, the court cab ask for more documentation, but no good laywer is going to waste your time and theirs going to court unprepared. You also have to pass a means test, meaning you have to make very little and your debt has to exceed the minimum requirements to file in both types. You also have to list ALL your assets, property, vehicles, retirement accts, jewelry, etc. of which it is deemed is worth a bunch, you may be required to sell some to pay off the debt. Also a bankruptcy is public record. If I were you? I’d be super cautious. Doesn’t sound right. Trust your gut.

  12. 12
    rosemary perin Says:

    i was married now divorced . when i was married my ex spouse ran up credit cards in his name got stuff for his mother!! he told me because we were married are credit was one . so the Attorney had me agree to sign documents for a bankruptcy chapter 7. now it has been over 7 years and it remains on my credit report! what can i do to get this off my credit report??

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