In a recent letter to the Your Debt Adviser column in the Columbia Daily Tribune, a woman writes that she’s trapped in unmanageable debt — six months behind on her credit card bills. She has been considering filing for Chapter 7 or Chapter 13 bankruptcy, but she is concerned that doing so might mean that her husband’s assets would be taken and his credit score ruined.

Should she file for bankruptcy? The Debt Advisor, Steve Bucci, thinks that her guilt, fear and shame about her debts are keeping her from making a good decision. Emotions do affect us as we try to resolve debt problems. The most important first step is to decide on a strategy.

As Bucci points out, the real threat to your spouse’s finances is inaction. If you put off dealing with your debts for too long, your creditors may sue you, which could allow them to garnish your wages, levy your bank account, or put a lien on your house. Collection actions are much more likely to negatively affect your spouse than filing for bankruptcy.

Making a debt repayment plan on your own can backfire if you can’t keep up

In this case, the woman said that her credit card debt was all in her name. If your spouse is not a co-signer on your credit cards, collections on those accounts might not affect your spouse’s credit rating. If you live in a community property state (which Florida is not), your spouse is equally responsible for any credit card debt accumulated after your marriage.

However, your spouse could still be affected. First, if you have a joint bank account and a creditor levies it, the creditor can empty the account to pay the debt, no matter whose income was deposited there.

Second, if you and your spouse own your home jointly, a lien against your home will affect both of you.

With those facts in mind, you have the option of negotiating a repayment plan with your creditors. Contact them, explain your situation and tell them what you can afford to pay. You can hire a lawyer or work with a nonprofit debt settlement service to do this. You will probably have to make a separate agreement with each creditor. If you do so and are able to pay the agreed-upon amounts on time, your creditors cannot initiate collection proceedings.

The downside of a plan like this is that it’s easy to end up agreeing to pay more than you can afford. A Chapter 13 repayment plan arranged through the court is based on your ability to pay, so it should not happen. Also, if you find you cannot make your Chapter 13 payments, you are working with the court, not your creditors, so you may be able to get back on track before your creditors can start collection actions against you.

If you qualify for Chapter 7, you can have most types of debt wiped away. You will need to work with an experienced bankruptcy attorney to determine whether you can keep your house.

In most cases, a Chapter 7 or Chapter 13 bankruptcy filed by one spouse only affects the other by increasing their responsibility for joint debts. Consider your situation carefully with the help of an experienced attorney.

Source: Your Debt Adviser column, The Columbia Daily Tribune, “Emotions get in way of decision,” Steve Bucci, March 14, 2010