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Spouse filing BK in a community property state


tiger0912
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Hello there,

 

Both my husband and I have a significant amount of debt, with the majority of it (roughly 75%) being acquired before our marriage. We are both attempting to clean up our debt and CRs, but whereas I'm making some headway (slowly but surely) on clearing up mine, it looks like his best option at this point will be to file Ch. 13. 

 

Seeing as we're residents of a community property state, I have a couple of questions:

  • Will I be forced to file with him? I'd prefer not to if at all possible - while my debt is significant, I'm still at the stage where I can likely clean all of this up without costly judgments against me. The vast majority of my debt (85%) is in student loans, and I am in good standing with all of those creditors. I also know BK doesn't do much of anything to help with student loans anyway (they're all federally backed).
  • Assuming I'm not forced to file with him, can his creditors then come after me for any discharged debt? None of the debt either of us have - both before and during our marriage - was taken out jointly. All of his debt is in his name, and vice versa.

We have no joint assets FWIW. Our bank accounts are separate (not even listing the other as an authorized user), we do not own a house or other property, and our cars are in our own names. The only things we are both listed on is our lease for our house and our car insurance policy. 

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As long as you live in a community property state they will come after you then. Talk to the BK attorney to see what protection you can get.

 

Thanks, TomnTex, that's what I was afraid of. I'll be going with him to talk to the attorney - just wanted to see if I could go in armed with some knowledge.

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Will I be forced to file with him?

No but your income will be included in formulating the Chapter 13 Plan.

 

Assuming I'm not forced to file with him, can his creditors then come after me for any discharged debt?

Yes and no. If your husband obtains a discharge, it will be a “community discharge” that will protect the marital community so long as there is one. However, if you did not file with your husband a creditor can sue you individually and collect based upon sole and separate property. Assuming you have no sole and separate property the judgment would be worthless. See 11 USC 524(a)(3).

 

We have no joint assets. . .Our bank accounts are separate. . . our cars are in our own names.

Wrong. Unless you have a pre-nuptial agreement or some other agreement that divests the community, EVERYTHING you and/or your husband acquired after the moment you married (except real estate) is community regardless of whose name it is in.

Des.

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Thank you, Des. Not so worried about my income being included - I make significantly less than he does, so I don't think it really helps him or his creditors much.

Our bank accounts and cars were both acquired before our marriage. We really have nothing else of value. No house, no land, etc. I have a 401K through work. Does this change things?

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Our bank accounts and cars were both acquired before our marriage. We really have nothing else of value. No house, no land, etc. I have a 401K through work. Does this change things?

Cars ok. 401k is community for contributions made after marriage but not property of the bk estate and exempt therefore not a problem. Tell attny of their existence. Bank account IS community unless no deposits have been made since marriage. I assume paychecks are deposited therefore the funds sitting in the accounts are community. Bank accounts must be listed as assets. Tell attny.

Des.

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Hi Des,

Thanks, that makes sense about the bank accounts. So, if I'm reading this right, my bank account would be protected under communal discharge, but since my car is my sole and separate property, one of his debtors could come after me for that? Or am I reading too much into this? Sorry if my questions sound dumb - I just want to make sure I understand as much as I can before we meet with his attorney. I will disclose everything to him. Thanks!

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So, if I'm reading this right, my bank account would be protected under communal discharge, but since my car is my sole and separate property, one of his (creditors) could come after me for that?

His sole and separate creditor (a debt incurred prior to marriage) has no claim against you. If the debt was incurred after marriage, yes, the creditor could seek to recover based upon your individual liability and, if it got a judgment, could execute against your sole and separate property.

As a side note, unless there is a darn good reason for one spouse not to file (and a credit rating IS NOT a darn good reason), I always recommend that both spouses file. One bk =’s one attny fee and =’s killing two birds with one stone. What is a good reason? If one spouse has a sole and separate asset that needs protecting such as an inheritance. Another good reason. . . just married and non-filing spouse has absolutely no dischargeable debt (never happens).

Let us know how it goes with the attny.

Des.

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