When your marriage is intact but you are struggling financially, one spouse may consider filing for bankruptcy on their own. While you technically can file for bankruptcy without your spouse, Wisconsin’s marital property laws can complicate matters. Before filing for bankruptcy without your spouse, you should consult with an experienced bankruptcy attorney at Muter Law Office for advice.

When Filing for Bankruptcy Without Your Spouse Seems Like a Smart Move

There are times when filing for bankruptcy without your spouse may seem like the right move. Maybe you brought significant debt to the marriage, or your spouse worked hard to rebuild their credit after financial troubles and you do not want to drag them down. Or perhaps your spouse recently filed for bankruptcy and is not eligible to file again, or the debt is clearly tied to one person and filing individually feels like taking responsibility without making your partner pay for your mistakes.

In situations like these, filing for bankruptcy without your spouse may seem like the responsible and logical option. Unfortunately, this logic does not always prevail.

How Wisconsin’s Marital Property System Complicates Bankruptcy

Under Wisconsin’s Marital Property Act, almost everything a married couple acquires during their marriage belongs to both spouses equally. It does not matter whose name is on the credit card, who signed the loan, or who actually made the purchase. If it happened during the marriage, Wisconsin law presumes it is marital property. This presumption can fundamentally alter the bankruptcy protections available.

Understanding Marital Property vs. Individual Property in Wisconsin Bankruptcy

Wisconsin’s Marital Property Act classifies assets as either “marital property” or “individual property.” Almost all assets and liabilities acquired during a marriage are considered marital property, meaning they are owned equally by both spouses, regardless of whose name is on the account.

Individual property refers to assets that one spouse owned before the marriage, gifts or inheritance received during the marriage that have not been commingled with marital assets, and certain personal injury settlements.

Generally, filing for bankruptcy without your spouse in Wisconsin would apply only to individual property. However, individuals considering filing bankruptcy without a spouse should be careful because marriage can link finances in ways that are easy to miss, and bankruptcy filed without your spouse might only eliminate a small portion of your debt.

What Happens If You File for Bankruptcy Without Your Spouse

In Wisconsin, you can choose to file for bankruptcy without your spouse. If you file for bankruptcy individually, only your debts and assets will be considered in the bankruptcy process. Your spouse will be identified as a “Non Filing Spouse” on the bankruptcy petition. Their income and debts may be listed on the bankruptcy petition, but their personal debts and credit score will not be affected. However, if you file individually, your spouse will not receive the protection of bankruptcy laws, such as the automatic stay and bankruptcy discharge.

Likewise, marital property and any debts that are in both spouses’ names will not receive bankruptcy protection. If you have joint debts, you and your spouse will still be responsible for them after bankruptcy.

Chapter 7 vs. Chapter 13: Which Is Better When Filing Bankruptcy Without Your Spouse

The type of bankruptcy you choose to file can also affect your decision on whether to file bankruptcy without a spouse.

If the goal is to eliminate debt quickly without a repayment plan, Chapter 7 bankruptcy might be the better option, particularly when the debt is mostly unsecured, like credit cards, medical bills, or personal loans, and there is little property at risk.

Chapter 13 bankruptcy might be more advantageous if the filing spouse needs a way to catch up on payments over time, like if the family is behind on a mortgage, a car loan, or certain tax obligations. This can be beneficial for homeowners who need to stop the immediate pressure but wish to avoid foreclosure.

When Filing for Bankruptcy Without Your Spouse Makes Sense

Filing for bankruptcy without your spouse can make sense in certain situations, such as:

• If the debts are in one person’s name alone, such as medical bills, unsecured debt from before the marriage, or debt incurred due to a failed business.
• The Non Filing Spouse has strong credit to protect, which could be beneficial if the family is considering a large purchase, such as a car, refinancing a house, or to keep borrowing options open.
• Only one person’s debt is the problem.

Couples considering having one spouse file for bankruptcy individually should consider three questions:

1. Is the debt truly separate, or could marital property be exposed?
2. What assets are marital property and what assets are separate property?
3. Would the family be better served by having one spouse file or by both spouses filing together?

Deciding Whether to File for Bankruptcy Without Your Spouse

Deciding whether to file bankruptcy without your spouse is a complicated and nuanced decision that should not be made without assistance from experienced legal counsel. Determining how Wisconsin law characterizes the property will be a key consideration. Some property may belong to one spouse alone, some will be marital property, and some may become mixed if assets were commingled or both spouses used and maintained the asset over time.

The bankruptcy attorneys at the Muter Law Office can review your situation to determine how marital property rules might affect your bankruptcy filing and help you decide whether it makes more sense to file for bankruptcy without your spouse or to seek bankruptcy protection as a couple.

Contact the Bankruptcy Attorneys at Muter Law Office Today

The Muter Law Office is located in Baraboo and represents clients in bankruptcy matters throughout Wisconsin. Contact the Muter Law Office today to schedule a free and confidential appointment to discuss your situation and how we can assist you.