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    Community Property questions

    I live in Arizona, a community property state, community debt state.

    The majority of my wifes debt was incurred during the marriage.

    According to the Bankruptcy Code, and NOLO How to File Chapter 7 book, when only one spouse files, the other spouse is discharged of their share of the debt as well. Even in a community property state. Most non-community property states, this is the normal routing, but I have seen conflicting websites stating, that the creditors can come after the non-filing spouse in a community property state.

    However, according to the bankruptcy Code 524 (b)(2), if the non-filing spouse could not receive a discharge himself for whatever reason, like a prior chapter 7 discharge in 2004 in my case. Then the hypothetical discharge does not apply.

    I have a two part question to this.

    1. Will the creditors, after a no-objection 341 and discharge, still try to come after me for payment.

    2. Or is it too late for them to do this, because the case has already been discharged, and they did not object within the time frame as permitted.


    Please help, I am stuck with this, if we cant do the 7, then the 13 will be the way to go for us.

    Thanks everyone!
    Last edited by optimistic1; 12-29-2008, 08:00 AM.

    #2
    According to the Bankruptcy Code, and NOLO How to File Chapter 7 book, when only one spouse files, the other spouse is discharged of their share of the debt as well.
    In the chapter 7 context, Ia m not aware of any section of the BK code that says that. The non-filing spouse has liability if the spouse had liability before the BK.

    Comment


      #3
      Originally posted by HHM View Post
      In the chapter 7 context, Ia m not aware of any section of the BK code that says that. The non-filing spouse has liability if the spouse had liability before the BK.

      Comment


        #4
        They can take all my non-community property, I just dont want to be held liable for the payment of $25,000 in unsecured credit card debt. According to the code, they cant, but it doesnt get specific as to whether or not they can only object this during that timeframe during the filing process.

        The second paragraph above seems to state that, I could, If I wanted to, include even my own credit card debt in the bankruptcy, in a community property state, it does not matter whose name is on the account. But I could not receive a discharge of that debt if I didnt qualify for some reason for the discharge.

        It's confusing, because, is it only stating that I dont receive the hypothetical discharge if I try to include my credit cards? Or do I not receive the hypothetical discharge either way, like if only my wifes credit cards were on it?

        It seems to state "Further, under section 524(b)(2), if the nondebtor spouse would have been denied a discharge under section 727 had the nondebtor spouse filed a Chapter 7 case on the same date that the debtor’s case was filed, then a prepetition community claim incurred by either spouse may be collected from community property."

        So, to that, I say, well what if they dont object, is it too late? I would think if they tried to sue me, and they argued this specific code, a judgement would stand.
        Last edited by optimistic1; 12-29-2008, 08:01 AM.

        Comment


          #5
          Please read page 250 in the NOLO Chapter 7 book, under, Postbankruptcy Attempts to Collect Debts. Third paragraph.

          Comment


            #6
            It's not a great defense.

            It really only protects the non-filing spouses claim to community property that was part of the BK estate. For example, husband files BK, wife does not. There is 30K equity in the primary residence (putting exemptions aside for the sake of example), thus, each spouse has a 1 half interest in that equity. Because that equity was part of the BK estate, no creditor can do anything to get at the equity interest of the non-filing spouse.

            I think the Nolo book overstates the issue. If the non-filing spouse is employed, the creditors CAN garnish her wages that are earned post discharge.

            Comment


              #7
              Something strange happened. I replied in this thread, and nothing I posted is here!

              I was eloquent!
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog

              Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

              Comment


                #8
                But the bankruptcy codes states

                "Under the discharge provisions, if only one spouse filed bankruptcy, only that spouse receives a discharge. However, under section 524(a)(3), the debtor spouse's discharge will generally prevent the collection from postpetition community property of prepetition community claims incurred by either spouse."

                Thus, post-petition community property, would be wages.

                The quote above is from the IRS website, tell me how its wrong?

                Comment


                  #9

                  Comment


                    #10
                    That is why you need to actually read what the code section references

                    541 (a)(2)
                    (2) All interests of the debtor and the debtor’s spouse in community property as of the commencement of the case that is--

                    (A) under the sole, equal, or joint management and control of the debtor; or

                    (B) liable for an allowable claim against the debtor, or for both an allowable claim against the debtor and an allowable claim against the debtor’s spouse, to the extent that such interest is so liable.


                    In a nut shell, that says, property of the BK Estate. This is what it is saying, property that is part of the BK estate, after the BK is over, cannot be touched. But anything that is acquired AFTER the discharge, is fair game...at least to the extend of the non-filing spouses interest in that property.

                    Comment


                      #11
                      Yes, indeed you are correct, but, the marital couple is still a couple, so the only way they have a right to collect, would be if I got a divorce, or my spouse that filed died. It is still community property, "community", my income is part of the marital community, it is not seperate. While we are both married, there is nothing that would be only mine, it is part of the community, regardless, I cannot buy something and say it is only my property, it is the property of the community. Like my income, it is used to provide for the community, not just me, they cannot pick this thing apart.

                      I just dont see how both, myself, the IRS, a lawfirm in Wisconsin and the Authors of the best selling do it yourself bankruptcy could be wrong. I think they would clearly state what you have posted here, like, "you do receive a discharge as well, but they will still have the ability to collect the debt from you the non-filing spouse" but they do not.

                      Check this link. Note the second and third paragraph.

                      Last edited by optimistic1; 12-29-2008, 03:20 PM.

                      Comment


                        #12
                        At most you have a defense. Remember, I said they can go after the non-filing spouses income (or at least her share of her community income). There is a difference between assets and income. My concern for you is you are reading this asset protection as to include post-discharge acquired income, I believe such an interpretation is too broad, or at least, you have a risk of a subsequent claim on the non-filing spouses share of HER community. Now, if she doesn't work, this whole argument is moot.

                        The risk too you is probably low, but if you want to bring "certainty" to the situation, you should do a joint case. If you want to leave open a window of opportunity to your creditors (albeit a small one), then file separate.

                        Or, go hire an attorney in AZ attorney, have him put his license on the line by you hiring him and file your BK.

                        Comment


                          #13
                          That's just it, I cant do a joint case, I filed in 2004, so the certainty card does not apply, that is why it is so risky. But from what I am reading, the way I interpret it, they cannot collect from my income, or garnish my paycheck for a clearly discharged debt. Unless....they specifically object to the discharge within the small window you noted. After that, they are basically SOL, in my eyes, they might try and sue, but they will probably lose.

                          I read this also from a community property state, a newsletter from the Idaho State website, please read pages 2 through 9, it goes into detail about this topic. Let me know what you think.

                          Comment


                            #14
                            Am I reading wrong or does the info posted here confirm that if I list my husband's cc debts on my petition they will be discharged? I am filing alone, prose and in CA. Please correct me if i am wrong
                            Filed Chapter 7 4/22/2009
                            341 Meeting Scheduled 5/27/2009
                            Discharged 7/30/2009
                            Awaiting closing!!!!

                            Comment


                              #15
                              Originally posted by arami008 View Post
                              Am I reading wrong or does the info posted here confirm that if I list my husband's cc debts on my petition they will be discharged? I am filing alone, prose and in CA. Please correct me if i am wrong
                              Since you live in California, you *might* be right depending on your local bk court judge and trustees and how they interpret the grayer areas of the current bk law in this area.

                              As stated on a CA bk lawyer's site at http://www.mcfarlinlaw.com/bankruptc..._property.htm: "Although it is usually better for both spouses to file together, there are times when it’s perfectly acceptable, and even advantageous for one spouse to file alone. The interaction of community property law and bankruptcy law is a somewhat specialized area which requires the advice of a qualified California Bankruptcy Attorney." ... "After the bankruptcy is filed, all community property acquired is protected by the discharge. What that means is that even if only one spouse files for bankruptcy, the community property after a bankruptcy is not liable for the debts that existed when the bankruptcy was originally filed. 11 U.S.C. 524(a)(3). Though, it may be possible that any other property of the non filing spouse may be accountable."

                              So even though you plan to file alone, you really are going to have to get legitimate legal opinions about your situation from several experienced CA bk lawyers from your area to know what to expect regarding your husband's shared debt if you file alone.
                              I am not a lawyer and this is not legal advice nor a statement of the law - only a lawyer can provide those.

                              06/01/06 - Filed Ch 13
                              06/28/06 - 341 Meeting
                              07/18/06 - Confirmation Hearing - not confirmed, 3 objections
                              10/05/06 - Hearing to resolve 2 trustee objections
                              01/24/07 - Judge dismisses mortgage company objection
                              09/27/07 - Confirmed at last!
                              06/10/11 - Trustee confirms all payments made
                              08/10/11 - DISCHARGED !

                              10/02/11 - CASE CLOSED
                              Countdown: 60 months paid, 0 months to go

                              Comment

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