You can't hide a bankruptcy from your spouse

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question for the expert

Dear To Her Credit,
I am 66 and going to retire in the next year. My credit card debt takes all the money I earn. I am in way over my head. I am so embarrassed.

I am thinking of filing for bankruptcy to get out from under the debt. Our home is a reverse mortgage and our car payments are under my husband. The credit card debt is in my name only. Will filing for bankruptcy affect my spouse? -- Carol

Answer for the expert

Dear Carol,
One way or another, bankruptcy always affects both partners in a marriage. You can't possibly live together and share life as a couple and think your worries, bills and financial health won't affect your spouse.

If you are hiding these bills from your husband, and you hope to file for bankruptcy and get rid of them without telling him, that's not going to work. For one thing, bankruptcy isn't that easy. It involves appointments with your legal counsel, paperwork and public notice. You'll need money upfront to pay filing fees and at least some of your legal fees. You don't want to spend the next few months scrambling to reach the mailbox before he does. Sooner or later, he's going to find out.

In addition, secrecy is hardly beneficial to your relationship with your husband. I'm no marriage counselor, but I think your husband would rather know what is bothering you. Otherwise, he may think it's something much worse, or that he is in the doghouse. Your husband may already know about your debt, anyway. You're going to have to come clean and tell him exactly what's going on.

Your husband does not have to file bankruptcy when you do, but he could very well get stuck with some or all of the debt. If you live in a community property state (such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), he may be liable for the credit card debt even though his name is not on the cards. If you're not in a community property state, the creditors may still try to collect from him if they think he benefited from the expenditures.

Even if he's not held liable for the debts, your joint assets may be used to pay your creditors. When you file for bankruptcy, the courts look at everything you own that can be used to pay off your debts. If you have joint accounts or if you live in a community property state, don't assume your husband's money and other assets are safe from the courts' reach.

If you are in reasonably good health, I recommend that you avoid bankruptcy if at all possible. Instead, keep working and find a way to pay off your credit card debt. You'll be in better shape when you do retire. For one thing, if you can work just a few more years, you can put off claiming your Social Security benefits. Every year you delay collecting benefits increases the amount you receive when you do retire by 5 percent to 8 percent. (For details, see the Social Security Administration website's page, "Retirement Planner: Delayed Retirement Credits.") By continuing to work, you may also keep building up the balance in your employer's retirement plan. It would be wonderful to retire at age 66. However, as you and many people are finding out, you may not be able to retire when you want if you didn't make adequate plans ahead of time or if those plans didn't work out.

If you are unable to keep working, you and your husband may still be able to pay off the debt. The amount you're currently spending on car payments could go a long way toward credit card payments. You don't need a fancy car after you retire. You may be able to sell one or both of your cars. Between your Social Security benefits and cutting back on other expenses, such as work lunches and clothing, you may be able to balance your budget.

A good credit counselor can help you make a budget and sort out your options for paying off your debt faster. The counselor may also suggest debt negotiation or other strategies. Look for a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

If you decide bankruptcy is the only way out of your debt problem, be sure to get qualified advice in your state before you file. You also need to talk frankly with your husband. Show him your credit card statements. He may be upset, but it's better for him to hear it from you than to find out some other way.

You have a lot going for you. Your husband seems to be financially stable, you will soon qualify for Social Security benefits and you have payments coming in from your reverse mortgage. Once you and your husband get financial counseling and start working together as a team, you can solve this problem.

See related: When bankruptcy makes sense

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Updated: 12-13-2018