Paying for a car that your ex is driving can get old quickly. So can being on the mortgage of a home you haven’t lived in since a divorce. If you’re ready to sever financial ties, filing for bankruptcy can help wipe out old debt so you can move on with your life.
You can try asking the lender to take you or your ex off of the account; however, it’s unlikely to work. Most banks won’t remove an individual from a loan voluntarily because it’s in the lender’s best interest to keep as many people—and incomes—tied to the debt as possible.
Another option is to refinance the loan. But many people don’t have sufficient credit to do so. If you’ve run out of ways to untangle yourself from a loan that you’re not benefiting from, filing for bankruptcy might be your answer.
Bankruptcy can be a great tool when a relationship goes south because gets rid of many of the types of debts couples share during a relationship. For example, bankruptcy will wipe out (discharge):
The person who files for bankruptcy and receives a discharge (the order that wipes out debt) will no longer be responsible for paying the debt. So if you want off of the loan, chances are you’ll be able to make that happen by filing for bankruptcy.
If, however, you want to get your ex off of a loan you’d like to keep, you’ll have to convince your ex to file the bankruptcy case (more below in “What This Approach Won’t Do”).
Bankruptcy is an effective way to discharge a loan secured by property, such as a mortgage or auto payment. If you—or your ex—want to know whether your ex will be able to keep the house or car, the answer will depend on whether your ex is legally responsible (an obligor) for paying the loan.
Filing for Chapter 7 bankruptcy will be the most streamlined way to remove your liability from a loan. Qualifying debt gets wiped out in four to six months, and you won’t need to pay your creditors through a repayment plan.
You can achieve the same goal by filing for Chapter 13 bankruptcy, but you’ll have to complete a three- to five-year repayment plan. For more information, read What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
Removing a former relationship partner from a loan that you’re both responsible for can be a bit trickier. Why? Because in most cases, your bankruptcy filing will eliminate your liability only—not the responsibility of your ex. So unless your ex will agree to file for bankruptcy, you’ll likely have to explore other options.
Also, you should be aware that bankruptcy won’t wipe out your responsibility to pay particular debts under a marital separation agreement entered into in family court. However, you can wipe out marital property division payments in a Chapter 13 bankruptcy.
If you want to explore ways that your filing might wipe out an ex’s obligation, or if you’re facing a family law-related problem, you should consult with a local bankruptcy attorney.