Spouse income considered on community property state? (WI)

[dennys]

Hi,
First let me say that I've found a lot of answers to many questions that I had on BK on this forums, and I thank everyone who has contributed.
Now, on to my question. My wife and I are considering to file for BK since she is currently unemployed. I currently make around 3400/month and cover all the household expenses plus her credit cards, auto lease insurance, and end up with about $100 left. We are considering she alone filing for Chapter 7 in order to alleviate our current situation.
Being that we live in Wisconsin (community property state), I wanted to know if my income will be used or considered by the courts on her BK filing, and if it is, how will it affect her chance of being discharged. Are there certain percentages of income vs expenses (or debts) that need to be met, and will I be required to meet these percentages?
She got some of her credit cards before we were married and some afterwards, and they are all under her name only (with the exception of 1 or 2). The auto lease is only under her name.

Thanks in advance for any tips/info.
-D

[Minera]

I wish I could help, I live in CT and we are not a community property state. I filed alone after me and my husband were married, and didn't have to list his income at all just halved all my expenses besides the credit cards.

[HHM]

Yes, your income and assets will be part of her bankruptcy. When it comes to income, the BK code requires a debtor to list ALL sources, which includes a spouses income (since the spouse receives a benefit from that income) and in a community property state, the wife has a property interest in that income.

Also, most debts are considered community debts, so if she files alone, any community debts may be discharged as to her, but not as to you. When it comes to community debt, it really doesn't matter whose name is on what card, if the debt was incurred while your were married, it will be a community debt.

[herekitty]

HHM is right, Wisconsin is very much a 50/50 state (part of the reason I had to file here).

[optimistic1]

I keep finding conflicting reports on this topic, according to the NOLO how to file chapter 7 book, a non-filing spouse does in fact receive a discharge as well. I have found this instance not only in that book, but on the IRS website, its called a hypothetical or phantom discharge, in fact, the non filing spouse could include all of his credit cards on the petition and get them discharged as well, as long as they were aquired during the marriage. I even have attorneys tell me both ways, no one seems to understand this topic, but the NOLO guide and the IRS website do.

[justbroke]

I keep finding conflicting reports on this topic, according to the NOLO how to file chapter 7 book, a non-filing spouse does in fact receive a discharge as well. I have found this instance not only in that book, but on the IRS website, its called a hypothetical or phantom discharge, in fact, the non filing spouse could include all of his credit cards on the petition and get them discharged as well, as long as they were aquired during the marriage. I even have attorneys tell me both ways, no one seems to understand this topic, but the NOLO guide and the IRS website do.

Hence the reason they call it a "hypothetical" discharge.

It isn't that litigated, although issues of community property and community debt have been to some extent.

In the community property (debt) states of Wisconsin, Texas and Arizona, you'd think there would be much more caselaw on the topic.

If you do intend to use the "hypothetical" discharge defense, be prepared to fight it in the Bankruptcy Court. Depending on the types of creditors and their gumption for litigation, they may fight you over the discharge. You may find creditors still coming after the non-debtor spouse.

I don't understand why both spouses wouldn't just file a joint petition. But that's, just me.

[optimistic1]

Well, because in my case, I already filed a Ch. 7 in 2004, and that is exactly what the creditors might end up using against me. I cant interpret it like a lawyer, but the code states in section 524(b)(2), that if I didnt qualify for a bk, then the hypothetical discharge does not apply, and they can seek payment from me. I can't stand this particular issue, because no one reads the code, including the creditors. It specifically states that they cannot come after me, but they still try, that should be grounds for suing them.

[justbroke]

Well, because in my case, I already filed a Ch. 7 in 2004, and that is exactly what the creditors might end up using against me. I cant interpret it like a lawyer, but the code states in section 524(b)(2), that if I didnt qualify for a bk, then the hypothetical discharge does not apply, and they can seek payment from me. I can't stand this particular issue, because no one reads the code, including the creditors. It specifically states that they cannot come after me, but they still try, that should be grounds for suing them.

Of course it is grounds for suing them, but the key is... is this "hypothetical" discharge an actuality?

Put another way... is it your burden to prove that you actually have a discharge, not theirs?

If a bunch of lawyers don't agree, then it is definitely an area of the Code which isn't well flushed out. I agree with how the discharge section (11 USC 524) reads.

I wish it were that simple. The key is, what defines community property and community debt.

[optimistic1]

Well the mass majority of my wifes debt was in fact incurred during the marriage, thus it makes it a community debt. I am just not going to risk trying the whole thing, and instead do a Ch. 13 after my baby is born, and get a confirmable 36 month plan with a crammed down car payment. In three years, all will be well. Rather than risk this whole community property confusion.