A new rule passed recently by the Consumer Financial Protection Bureau that will make it easier for stay-at-home spouses to get credit cards.
Our Louisville bankruptcy lawyers understand that the ruling allows credit card companies to consider the assets and income of the working spouse when considering the nonworking spouse for a line of credit or a credit limit increase, so long as applicants are over the age of 21.
The rule is an update to the previous reading of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The original intention of the clause that was later altered was to prevent college students from using their parents’ income to rack up debt prior to graduation. However, it had the unintended effect of making it extremely difficult for spouses who stayed at home to secure a credit card without the permission of their spouse.
It’s estimated that this involved a third of all married couples, or about 16 million people.
While providing autonomy to spouses who contribute to the household in ways other than income is a positive thing, it also opens the door to questions regarding individual bankruptcy filings involving married couples.
Couples who marry pledge to stay together for better or worse. But sometimes, when the financial waters get choppy, it can be best to go it alone.
Many couples share joint bank accounts, joint credit cards and joint savings. So when they begin to consider filing for bankruptcy, it’s often unquestionably the right decision to file a joint bankruptcy.
This is where both parties can wipe out all dischargeable debts that you both owe.
On the other hand, if only one spouse files for bankruptcy, the remaining spouse will still have to pay any of his or her own debts, as well – as well as any joint debts that were incurred.
So the decision of whether to file for joint or single bankruptcy is going to depend on the kind of debts you both owe and in whose name each debt is held.
It may be, for example, that one spouse has the majority of the significant debt in his or her name alone. In that case, it could be beneficial for the family to decide that only one spouse will file for bankruptcy.
This could be good for a number of reasons, not the least of which is that you will have at least one spouse whose credit is still in good standing. That can be a major help when it comes time to getting approved for a new loan for a car or a home or any of the other various things that require a credit check. This can also help the spouse who filed more quickly rebuild their credit.
On the other hand, non-filing spouses may not be completely out of the woods, particularly if they have significant assets. So just as creditors will now consider a non-working spouse’s access to the working spouse’s income as a factor in deciding whether to offer a credit card, so too might those assets and income be listed in the bankruptcy filing.
This might be one reason that a non-working spouse might have to file for a Chapter 13 reorganization bankruptcy, as opposed to a Chapter 7 liquidation, which has had strict income and assets requirements as of a 2005 law.
But you won’t know for sure regarding your specific situation until you sit down with a bankruptcy lawyer and discuss all your options.
If you need to speak to a Kentucky bankruptcy attorney or Louisville foreclosure defense firm, contact the Schwartz Bankruptcy Law Center at 866-270-4495 for a free and confidential consultation to discuss your rights.
New rule helps stay-at-home spouses, By Janna Herron, Bankrate.com
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Education, Solid Career Won’t Shield You From Financial Woes, May 1, 2013, Louisville Chapter 7 Bankruptcy Lawyer Blog