A prenuptial agreement may seem like an ironclad way to protect your premarital assets after your wedding, allowing you and your spouse to predetermine who is responsible for what assets – and debts. But depending on your state’s laws, a prenup may give you little or no protection if your spouse files bankruptcy. Keep reading if you’re wondering can my prenuptial agreement protect me from bankruptcy?
Prenuptial Agreement
A prenuptial agreement allows a couple planning to wed the opportunity to declare assets and liabilities held by each party individually before marriage. Each party lists his assets and indicates how these assets will be handled during the marriage and in the event of separation or divorce. While prenuptial agreements are often contracted to protect premarital property, they may also include language specifying individual responsibility for debts incurred before the marriage.
One thing that you have to know is that a premarital agreement can’t be verbal. This means that you do have to go through the steps of writing the agreement out. Both you and your spouse have to sign the agreement. That signature, however, is only valid if you both have time to read over the agreement. You both have to have time to understand and consider the terms of the agreement. For that reason, you shouldn’t wait until the last minute to take care of the premarital agreement.
A Complex Legal Issue
A prenuptial agreement is intended to stand in a court of law as a couple’s declaration of how property and liabilities will be handled during the marriage and in the event of divorce. While the Federal Uniform Premarital Agreement Act makes prenuptial agreements legally binding, this legal protection only applies to legal actions between the married couple. Therefore, premarital agreements offer no legal protection from actions taken by creditors during bankruptcy proceedings.
Bankruptcy And Marriage
While it is possible for one spouse in a marriage to file bankruptcy without the other spouse filing as well, there is no guarantee that the spouse who does not file will not be held responsible for repaying the filing spouse’s debts, and that includes spouses who had prenuptial agreements that separated their property and/or finances. If the debts leading to the bankruptcy were incurred by one spouse prior to the marriage and are held in that spouse’s name only, there may be no legal ramifications for the non-filing spouse. However, if the debts were incurred during the marriage, or the spouses live in a community property state, the non-filing spouse may be responsible, regardless.
The Effects Of Filing For Bankruptcy Before The Wedding
If your future spouse has a great deal of debt and is considering bankruptcy, there are two ways you can handle this. The first option is filing before the wedding. Filing for bankruptcy before the wedding is often the best option; however, some couples do not realize this or have time to complete it before their wedding day.
Filing before the wedding simplifies the bankruptcy process. The person filing will report his or her income, debts and assets, and the court will only view those things. The court will not view the future spouse’s assets, debts or income. If you file before the actual wedding date, the court will handle the process in this way.
Call the Law Offices of Patrick L. Cordero for a free bankruptcy consultation today at (305) 445-4855.