Anyone who has filed for bankruptcy or is considering filing for bankruptcy has likely wondered about how that decision could impact your future. Someone with a previous bankruptcy who is considering marriage would be even more curious about how it might impact your new relationship. A recent article by Fox Business discussed that very issue, including how one person’s credit (or lack thereof) might impact another’s.
The reality is that a bankruptcy will haunt your credit history for years to come however, that does not mean it lasts forever. If someone files a Chapter 13 bankruptcy, in which they agree to pay back at least some of their debt, the bankruptcy will stay on their credit report for seven years. In the case of a Chapter 7 bankruptcy, which comes with no repayment plan, the credit report will reflect the bankruptcy for 10 years.
Those with a previous bankruptcy (or worried about marrying someone with a previous bankruptcy) can feel good knowing that a previous bankruptcy will not impact your partner’s credit. This means that a fiancé or spouse’s bad credit will not lower your credit score. The reason is because marriage does not mean that credit reports are merged or that debts immediately become communal property. Instead, one person’s bad debts or bad credit history remain their own.
While it’s true that the bad credit of a spouse will not directly impact you, it can have serious indirect effects. For instance, any time you two attempt to buy something jointly both credit scores will be considered. If you apply for a joint credit card or a joint home mortgage, the bank will take each of your individual credit histories into account, which may result in the denial of your loan. At the very least, experts say you can expect that the interest rate offered by the lender will be much higher than it would be if you applied for the loan on your own. Another downside is that if you do apply for the loan alone you will likely receive a smaller amount than you could have gotten together given that only one party’s income will be taken into account.