Hello World! Welcome Friends! When you start a relationship with someone, it’s normal to want to learn more about their background, and this can include their finances. As your relationship progresses, if things are getting more serious, there could be a point where their finances influence your own.
That’s why you may be hesitant to get into a serious relationship with someone who has a history of debt, financial problems, or who has filed for bankruptcy.
Maybe you’re already well into the relationship before you find out about the bankruptcy, and you’re not sure what to do next.
The following are things to know about the process of bankruptcy and how to be in a relationship with someone who’s filed.
What Does Filing For Bankruptcy Mean In Life?
Whether you find out from the person themselves or you figure it out by researching them, you may be wondering what it means to file for bankruptcy.
Bankruptcy is a legal process that involves either a person or a business that can’t pay its debts. The process starts with a petition filed by a debtor. Less commonly, a petition might be filed on behalf of creditors.
The assets of the debtor are evaluated and may, in some cases, be used to repay some of the outstanding debt they owe.
The goal is to provide someone a chance to start fresh through debt forgiveness for things that just can’t be paid. When someone completes their proceedings, they’re relieved of their debt obligations.
However, if the person in debt tries and dodges payments by leaving the state, changing their name, etc, then there will be people coming after them to get them to settle their debts. This could mean the utilization of tracing agents, local authorities, and so on. If you suspect that this could be happening and you say nothing then you could be prosecuted as well, just with a different charge. So it is important that if you are the person in debt or just a friend, you need to pay off the debt or claim bankruptcy before you get yourself into a situation without anything.
The federal courts handle all of these cases in the U.S. Decisions are made by a bankruptcy judge, who decides if someone is eligible to file and whether their debts should be discharged. A trustee usually handles the administration of these cases.
There are a couple approaches or ways to file bankruptcy.
Chapter 7 can be filed by individuals with little or no assets. When someone files for this type, they can get rid of unsecured debts, but if they have assets that are non-exempt, they have to liquidate those to pay for some or all of their debt. The basic idea is that a person sells off their assets to pay their debt. If someone doesn’t have any assets, or their assets are only exempt property, they may not pay back any of the debt.
Another type of bankruptcy is Chapter 11. Businesses file this to stay in business, reorganize and become profitable again.
Chapter 13 is a process for bankruptcy for people who make too much money to otherwise file for Chapter 7. Individuals create a plan for debt repayment, usually in installments over a period of three to five years.
What’s Life After Bankruptcy Like?
If you’re dating someone or thinking about dating someone who’s gone through bankruptcy, you may wonder what their life could look like and how it affects them on a day-to-day basis.
If someone has just declared bankruptcy, it can be a long process.
Following a bankruptcy, it’s going to be very difficult for a person to get any kind of loan. After a year, the individual might be able to improve their credit score and qualify for some types of loans, but usually only ones with very high interest rates. Getting credit for a big purchase like a car or house may not be possible at all.
A Chapter 7 bankruptcy is on a credit report for ten years. Chapter 13 bankruptcy should disappear after seven years.
There are ways that a person can rebound after a bankruptcy, but it takes time and work.
Maintaining a home and job is helpful. Having stable employment and residential history is one way to show creditors that you’re a reliable person. Paying your bills and maintaining a checking and savings account is also helpful.
Could Dating Someone Who Filed Bankruptcy Affect You?
If you find out someone you’re dating or contemplating dating filed bankruptcy, there won’t be any financial effects for you, at least not directly.
You have to think about things in the sense of the larger picture, though.
For example, could different viewpoints on money and financial management cause you to fight?
Financial issues are one of the predominant reasons couples fight and ultimately go their separate ways. If you’re someone who thinks of yourself as being financially responsible and your partner doesn’t, that can be a problem.
Learn as much as you can about the person’s bankruptcy situation to figure out why it happened and where they stand currently.
You don’t necessarily have to avoid a relationship with someone who filed for bankruptcy unless you prefer to, of course. You should go into it with a full understanding of the implications and what their plans are to avoid a similar situation in the future.
What About Marriage?
Planning to marry someone with bankruptcy in their past can be different than simply dating.
Marrying someone doesn’t mean that your credit report is merged with theirs. You’ll both have your own credit score and history, and derogatory marks on your spouse’s account won’t affect yours unless it’s a jointly held account.
You’re not responsible for someone’s debts that your partner took on before you got married unless you cosigned. If you live in a community property state, you do have an obligation to repay the debt your spouse incurs during your marriage.
The biggest issue here will be if you want to make big purchases together.
For example, many couples plan to buy a home, and if your partner has gone through bankruptcy, both of your scores are relevant in whether or not you get approved and also your interest rate if they offer you a mortgage.
When you apply for a mortgage, the lender usually looks at the median score for both partners and then uses the lower of the two for the determination of your terms.
Finances are something that you should talk about before you get married and as early on in your relationship as possible. Financial differences or issues can prove insurmountable for many couples.
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