Need advice ..... spouse filing seperately...community property state

[tjs1970]

Hi,

My wife and I live in WA state. Community property state. Here is where we are at:

House in my name, purchased before we got married. It is not in foreclosure yet, but will be by the spring as we are walking away from it and living here as long as we can until we have to move.

I have filed for a chapter 7 in the past in June of 2003 which was discharged in 10/2003.

My wife has never filed. Ever.

I am currently unemployed due to a layoff back in 3/09. She is currently employed full time.

We have unsecured debts that break down this way:

My name only: 40k
Her name only: 30k
Joint: 10k (both were hers to begin with but my name was put on after married)

IRS tax owed by her: $4k
Student loans owed by me: $55k

First mortgage in my name only: $373k
Second mortgage in my name only: 94k

House value: $345k'ish


I understand I cannot file for a chapter 7 and may not be able to file for a chapter 13 because of my employment status.

I have read things online that indicated a possible discharge of our joint debts and/or my debts in addition to hers because we are in a community property state. I spoke to an attorney today and he seemed to think the creditors would not be charged off and that they would all actually come after me, at least the joint one's would.

How would our house situation help or hurt her ability to file a chapter 7?

Could any of my debts be included even though I can't file?

What if we have her file just before we are about to let the house be auctioned off, and then we'll only be a year or so away from being able for me to file again? I know this is sounding extremely irresponsible, but the last few years have been a complete nightmare going from 175k a year in income, to 100k, to 72k to zero. I didn't buy this house with bad credit, poor loan terms and no financial ability to pay. Life just happened and now we are stuck.

Her income is $42k a year.

[tjs1970]

We also have two joint auto loans that we want to keep. One of which the amount owed is more than the car is worth, but since it is a very reliable car and low miles, we think it would be better to keep it than get a lesser car with a high interest rate after a BK or not get a loan at all with our income situation. We are up to date on all car payments.

Our mortgage is behind since April of 2009.

We just stopped paying our credit card minimums as it was too much to take with so little income.

[whipster1]

You are eligible for a Chapter 13 now, since 4 years have passed since your 7. As long as there is income to fund the plan it can be minimal payments to creditors, I saw one that was 2% payback that my attorney is handling.

[tjs1970]

Well I am unemployed so I do not have income to support any type of Chapter 13 plan. I am getting unemployment of 611.00 a week but that ends in late March.

[Chowder]

He's probably thinking you both go 13

[tjs1970]

why would we both go 13 when we can completely discharge 40k or so in debt?

[Chowder]

Don't know. It's just a guess.

It's not your first time around so you probably know what you're doing, but 40k seems on the small side to file. JMO.

[tjs1970]

on the small side to file?

if you read the original post you will understand.........we have over 80k in unsecured..........55k in student loan debt........one income.........a house upside down over a 100k and 4k in tax debt to the IRS..........and one of our vehicles upside down by 8k

[backtoschool]

In a community property state, all debt incurred in the marriage will not be discharged unless you file jointly.

Student loans are not dischargeable.

IRS taxes less than 3 years old are not dischargeable. (when did you file the tax return that resulted in the taxes owed?)

Second mortgage: Only strippable in a Chapter 13.

I am not sure that one person filing is going to help your situation much.

[Chowder]

So you are thinking you'll discharge everything but the school loans with just her filing?

I filed here in Wa too. In my case, everything was in my name so any community debt was not questioned. Since the biggest portion of yours is the house, acquired before marriage, no idea how that will play out.

[tjs1970]

I know that the IRS and student loans are not dischargeable. I have the mortgages in my name, and we have already decided to walk away from the house and let it foreclose and havent made a payment since March and still no NOD, so we are at least four months from foreclosure, probably longer.

What I want to know is what amount of the unsecured debt can be discharged if only my wife files a chapter seven? I have read that since it is community debt in a community property state, that the non filing spouse gets the benefit of the discharge without filing. It is often called a Phantom Discharge.

Even without the phantom discharge of my unsecured debts, we could discharge her unsecured debts and since my credit is trashed anyways from the foreclosure, why not just live here and stretch it out as long as possible before they make us leave and then file my own chapter 7 when I am eligible in about 18 months? That way the remaining 40k that wasnt discharged by my wife can be discharged by me.

Of course we will continue to pay the car, student loans, and the IRS amount owed and since the car loans are in good standing, they will help build our credit back up with a few good tradelines. Same with the student loans being in good status and good trade lines.

[backtoschool]

I know that the IRS and student loans are not dischargeable. I have the mortgages in my name, and we have already decided to walk away from the house and let it foreclose and havent made a payment since March and still no NOD, so we are at least four months from foreclosure, probably longer.

What I want to know is what amount of the unsecured debt can be discharged if only my wife files a chapter seven? I have read that since it is community debt in a community property state, that the non filing spouse gets the benefit of the discharge without filing. It is often called a Phantom Discharge.

Even without the phantom discharge of my unsecured debts, we could discharge her unsecured debts and since my credit is trashed anyways from the foreclosure, why not just live here and stretch it out as long as possible before they make us leave and then file my own chapter 7 when I am eligible in about 18 months? That way the remaining 40k that wasnt discharged by my wife can be discharged by me.

Of course we will continue to pay the car, student loans, and the IRS amount owed and since the car loans are in good standing, they will help build our credit back up with a few good tradelines. Same with the student loans being in good status and good trade lines.

Ok, I see where you are going with this now. Yes, the debt that isn't discharged will become your responsibility and will need to be discharged in 18 months when you can file chapter 7 again.

The house will need to be walked away from at some point because that is the only really tricky part of your scenario.

Your only risk that I can see, is waiting out the foreclosure. You have no control over when that will be, etc. She will need to have the trustee approve reaffirming the cars or at least one car, which will require being able to show that you can afford the payments.

[tjs1970]

both cars are joint accounts...........so i am not sure if it will be a problem reaffiriming them or not......her income alone is enough to make both payments, but since i am not paying the mortgage and am getting unemployment we definately can make those payments.........not sure how the late/unpaid mortgages will be looked at in her paperwork though? will they require her to have a housing expense on that paperwork if we are not paying?

[backtoschool]

both cars are joint accounts...........so i am not sure if it will be a problem reaffiriming them or not......her income alone is enough to make both payments, but since i am not paying the mortgage and am getting unemployment we definately can make those payments.........not sure how the late/unpaid mortgages will be looked at in her paperwork though? will they require her to have a housing expense on that paperwork if we are not paying?

Yes of course you will have to list a housing expense. Squatting out a foreclosure will not be considered a legitimate long term housing plan by the trustee.

[DebtEnder]

Just a question but did you get these mortgages after your Bk 7 in 03 or before?

It sounds like you got this house 2-3 years ago from the sounds of it but it's not clear. If by some chance you had this house before your 1st bk 7 any chance you didn't reaffirm?