When one spouse files bankruptcy: a Maryland story
Imagine “Sarah” and “John” live in Maryland and are married. John falls behind on debts and decides to file for bankruptcy under chapter 7 or chapter 13 of the federal Bankruptcy Code. Sarah doesn’t file. What will happen to her? How does Maryland law affect her when her spouse is the one who filed?
1. Spousal liability for each other’s debts
Under Maryland’s general debt-and-spouse rules, a spouse is not automatically liable for the other spouse’s individual debts. However, when the spouse willingly agrees to be personally responsible for the debt, by co-signing or jointly opening a credit account, they become liable for that debt. So for Sarah, if John incurred a debt in his name alone and she didn’t sign or co‐sign, she is not responsible just because she’s married to him.
BUT, if the debt was joint (their names on the credit card, or they co‐signed a loan) then Sarah is responsible. So one effect for the non‐filing spouse, joint debts remain a risk, even if the filing spouse gets a discharge of the debt.
2. The filing spouse’s bankruptcy and the non-filing spouse’s exposure
When John files bankruptcy, the automatic stay (under federal law) stops collection actions against him. But Maryland law does not automatically protect debts that Sarah remains liable for (because of joint debt). This means that even though John files, creditors may still pursue Sarah for the debt if it was in both their names.
Also, if John files and the petition lists only him (i.e., they file individually), Maryland law still requires his bankruptcy petition to include information about household income and joint property, including that of the non-filing spouse (Sarah).
Thus, Sarah’s financial information (income, household contributions) can become part of John’s bankruptcy case—even though she isn’t filing. That means from a process standpoint, she may have to provide information, even if her name isn’t on the petition.
3. Property ownership, non-filing spouse, and exemptions
One of the major concerns for a non-filing spouse is: Could her assets or their jointly owned assets be endangered by the filing spouse’s bankruptcy? Under Maryland law, a number of protections exist. Two big ones: (a) exemptions under Maryland statute; and (b) the doctrine of tenancy by the entirety.
(a) Maryland exemptions
Under Maryland law (Md. Code, Courts & Judicial Proc. § 11-504), a debtor may exempt certain kinds of property from execution by creditors or from the bankruptcy estate. These protections mean that even if John files bankruptcy, certain property that is properly exempt and in his name may be shielded. For Sarah, the significance is: property that is exclusively her separate property may not be included in John’s estate. However, property jointly held may be subject to the schedules and trustee’s review.
(b) Tenancy by the Entirety (TBE)
In Maryland, property owned by a married couple may be held as “tenants by the entirety” (TBE). The key benefit: property held as TBE is not subject to the claims of a creditor of one spouse alone (i.e., only one spouse’s debt). So, if John owes individual debts and they own the home as TBE, a creditor of John alone cannot force the sale of that home to satisfy John’s debt, which is a meaningful protection for Sarah’s interest. However, if the debt is a joint debt, the TBE protection does not necessarily apply, because the debt is that of both spouses. Creditors of both spouses may reach property held jointly.
4. Practical effects on the non-filing spouse
Sarah is watching as John files for bankruptcy. She sees that the trustee asks for his assets, income, etc., and notices that Sarah is asked to provide her income information. She knows she’s not filing, but she must nonetheless help supply joint household data. This is because of Maryland’s requirement to include the non-filing spouse’s income on forms even in a single filing case, as the entire household’s income must be considered.
She also worries that joint debts (credit cards with both names) are still problematic. If John files to discharge the debt, Sarah might still be liable. That means she might need to continue paying on the debt, or risk collection actions from the creditor. She may choose to discuss with an attorney whether she should file jointly or separately.
5. What filing individually means for Sarah
If John chooses to file individually (not with Sarah), the law allows that. There is no law stating that both people in a marriage must file bankruptcy together. But even if Sarah doesn’t file, the household income is counted, her contributions may be factored in, and any joint property is part of the case. That means from a procedural standpoint, Sarah may need to participate.
6. Things Sarah should watch and ask
From the perspective of Sarah, the non-filing spouse in Maryland, here are some practical questions and protections to keep in mind:
Are there joint debts (accounts in both names, co-signing) that might leave Sarah personally liable even if John’s filing discharges his portion?
Is the home titled as tenants by the entirety? If yes, that gives strong protection for the property from John’s individual creditors.
Does Sarah have separate property (inheritance, gifted to only her) that is not part of the marriage estate? Under Maryland Family Law § 8-201, non-marital property remains solely hers and not liable for the spouse’s debts.
When John’s case is prepared, what income and expenses of Sarah (living in the household) must be disclosed? She should know that her income may be reviewed even though she is not filing.
Are the exemptions under Md. Code, Courts & Judicial Proc. § 11-504 being used properly? That includes the homestead exemption, wildcard exemptions, and personal property exemptions.
If Sarah is concerned about her credit rating, she should check that the bankruptcy filing by John alone appears on his credit report, not hers. But if there are joint debts and she fails to pay, her credit could suffer.
7. Summary: What Sarah should take away
In summary, in Maryland:
A spouse is not automatically liable for the other spouse’s debt, unless they co-signed or the debt is joint.
When one spouse files bankruptcy alone, the non-filing spouse’s income and household property often still are part of the case (means test and property schedules).
Property titled as tenants by the entirety offers strong protection from one spouse’s individual creditors.
Maryland’s exemption statute (§11-504) allows the filing spouse to shield certain assets; for the non-filing spouse, understanding which assets are separate versus marital is key.
Joint debts remain a risk to the non-filing spouse, even if the filing spouse is discharged.
The non-filing spouse should understand how the filing will affect the household finances, property ownership and future credit plans.
Final thoughts
If you are in Sarah’s shoes, married to someone who is filing for bankruptcy in Maryland, you’re not simply a bystander. The statutes of Maryland (especially relating to exemptions §11-504, marital versus non-marital property under Family Law §8-201, and tenancy by the entirety law) combine with federal bankruptcy law to shape how your assets, liabilities, and household finances will be treated. It’s wise to:
Ask which debts are joint versus individual.
Review how your property is titled (especially your home).
Understand what income and property you must disclose or protect.
Consider your own credit and financial plan going forward.
Consult a Maryland bankruptcy attorney (or family/estate planning attorney) to ensure the non-filing spouse’s interests are protected.
While bankruptcy can feel overwhelming, Maryland’s legal framework provides real protections, as long as you know how they apply.
Call Atkinson Law at (410) 882-9595 or contact us online to schedule your free 30-minute bankruptcy consultation. Let’s talk about how we can help you find relief and move forward.