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

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?

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

Potential Credit Affects

There’s one major myth about a spouse’s bad credit history: that it affects your score. It doesn’t. Your credit score is completely separate from your potential future spouse’s.

So why does this myth refuse to die? Probably because spouses that choose to share finances completely often have overlapping credit reports. If you’re both on the mortgage, the credit cards, and the car loans, those will all show up on both of your credit reports. So unless one spouse also maintains personal lines of credit, the scores may mirror one another.

But your scores aren’t automatically linked just because you’re married. And you can keep your finances largely separate on an everyday level, as well.

Sharing Credit Could be Problematic

It’s pretty easy to keep your checking and savings accounts, retirement accounts, credit cards, and even car loans completely separate from your spouse’s. In fact, many couples take this route, especially if they come into the marriage with widely different income levels, assets, or money management styles.

Still, even couples who keep their finances mostly separate may want to get a mortgage together. When you apply for a mortgage together, you can often qualify for a bigger loan, since both incomes count. But in this case, it may be better to apply for a mortgage on your own. You’ll get a better interest rate than if you add your fiance’s bad credit to the mix.

Other Problems with Sharing Assets

Maybe having to apply for a mortgage on your own isn’t a deal breaker. But here are some other situations where it may be better to keep your assets largely separate:

  • Let’s say he ends up with a tax lien from the bankruptcy. You file a joint return. In this case, the IRS will get its money before you get your tax return.
  • What about paying student loans or government loans affected by the bankruptcy? In this case, your assets could be at risk if you mingle them with your spouse’s. This could be especially dangerous if you’re in a “community property” state like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin.
  • Let’s say you own the home, but you use common funds to pay property expenses. Your husband deposits money into a joint checking account to help pay for these expenses. In this case, your commingled property could be considered partially his. In this case, his creditors could come after your property.

How to Protect Yourself

This isn’t to say that you should break off an otherwise great relationship. But you should take steps to protect yourself.

Probably the best way to do this is to wait to tie the knot until his bankruptcy judgment is final. Then, you’ll know exactly what you’re getting into.

If your soon-to-be-groom goes with a Chapter 13 bankruptcy, his debts won’t be discharged. He’ll still be paying them up after the bankruptcy is final. And even if he qualifies for Chapter 7, not all his debts are likely to be discharged. But once the judgment is final, you’ll know which debts he’ll still be dealing with. And you’ll know how those debts are likely to affect his take-home pay and ability to contribute to your household.

If you’re already living together, you should go ahead and consult and attorney now to determine if it’s possible to commingle your property while keeping you out of his financial mess. And if he still has significant debt post-bankruptcy, having this conversation with a lawyer is worth your while.

The Bigger Conversation to Have

Here’s another thing to think about: financial boundaries moving forward.

While some people file bankruptcy for reasons beyond their control, it doesn’t sound like that’s the case here. It sounds like your fiance has made some serious financial errors in the past. He likely overextended himself to purchase too many properties. And he failed to plan for the future.

This may not be a deal breaker, either. Especially if you think he’s learned his lesson. But you should be careful about letting him get involved in your finances until he’s proven himself.

Consider keeping your finances almost completely separate for a few years. Once he has rebuilt his credit and made consistently good choices, you can consider going the joint finances route if that’s your preference. In the meantime, you should hold the reins on most of the major financial decisions for your family.

Also, make sure you’re in the loop on the bankruptcy process. You should know exactly what steps your fiance is taking to complete the bankruptcy process. And you should get to see the paperwork afterwards with the record of his current debts and payment plans. This will help ensure you know exactly what’s going on with your fiance’s financial life before you decide to tie the knot.

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?

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

  1. Heaven

    70% of bankruptcies are from Medical debt, not being a “bum” as many of you think. It is sad that in our country, even with good insurance, if you had a major injury (or illness) there are many co pays, OOP that were not covered. That’s what happened to me before Obamacare in 2012. (It would not have happened with the coverage I had in 2013 with Obamacare but, too late) Alas, I had to go bankrupt to get out of debt as I was 64 years old and could not work (from injury) so, no way to repay all that medical debt. My score now two years later is 715. (Used to be 850) I am working again (at 67 ) on Medicare and staying solvent. If Obamacare is scrapped and they let the insurance companies go back to what we had, good luck to all! It was a nightmare. Dont assume anything about other people. You know what that makes you.

  2. Stephanie Colestock

    Keith,
    I would suggest waiting to marry until the Chapter 13 is finalized, just from a personal finance standpoint. Once she comes out the other side, you’ll have a clearer view of any liens that will be placed on future earnings, as well as have a better idea of the steps you’ll need to take moving forward. If you plan to buy a home to take out a loan together, you may want to rethink that while she rebuilds her credit (so as not to impact yours).

    She will have a plan to repay her debts, which will impact her earnings for the next 5 years or so. You’ll need to know exactly what that entails going in (unless you’re in a good enough financial situation to completely support you both). It’s a bit muddy and will impact her for years to come, but that doesn’t mean you can’t have a clear view of the steps you’ll need to take in your marriage. Either way, my suggestion would certainly be to hold off on the wedding until the bankruptcy plan is finished.

    Stephanie

  3. Anonymous

    I filed for bankruptcy in 2014 due to my ex charging up my credit cards. When we broke up he didmt take responsibility for them. Now I’m in a relationship and i want to get married but my boyfriend doesn’t want to marry me cause he’s afraid that it’s going to impact and hurt his credit. I dont know what to do and i dont want go wait 7 yrs for it to be gone. ????

  4. Anonymous

    My advice would be not to marry someone that had declared a bankruptcy.I married a man that had declared bankruptcy.He ran up credit cards,took out an equity line on our property .and ran up massive amounts of debt.I had to divorce him .They are financially irresponsible and do not learn their lesson.

  5. Anonymous

    This article was very well written and I really appreciate the author for the input. If you are getting married, please consult your CPA or your accountant about filing married filing seperately. It may be a better option in some cases.

  6. Anonymous

    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??

  7. Anonymous

    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.

  8. Anonymous

    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 $$$. ?

  9. Anonymous

    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. Anonymous

    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.

  11. Anonymous

    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?

  12. Anonymous

    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.

  13. Anonymous

    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.

  14. Anonymous

    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?

  15. Anonymous

    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.

  16. Anonymous

    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.

  17. Anonymous

    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.

Leave a Reply