Include non-filing spouse personal debts in petition in Community Property State?

[axle619]

Hi all.

An associate and I are bumping heads on an issue. We are both new to bankruptcy and practice in California. I am worried that he is doing something absolutely wrong and I am hoping someone here knows the answer.

Before I state the issue, I want to be clear that I am less asking for opinions (although for the sake of interesting discussions, it is welcome) and more hoping that someone could actually know the answer and preferably the code section or case. Additionally, I have researched it myself for quite a bit, but not found anything precisely on point. I am assuming this is because it is 1) obvious; 2) obscure; 3) routinely done incorrectly.

Facts: Married debtor filing chapter 7 without spouse. Non-filing spouse has credit cards in her name only. Non-filing spouse has a second mortgage on jointly-deeded home in her name only.

Issue: My associate believes that because we are in a community property state that non-filings spouse's personal liability, because community property would be liable for any claims, should be included in the filing spouses petition and subject to discharge (there is no separate property in this case so any discharge would cover them both). I disagree. I believe that until her personal liabilities are in default, and some type of claim is filed against her (and therefore against the community property), that they are not included.

My Reasoning: In California, it is quite often for one spouse to file for BK7 alone. The discharge will protect the community property of both spouses and any separate property of the non-filing spouse is only liable where the non-filing spouse actually had personal liability as well. This also serves to leave intact the credit of one of the spouses. If we were to follow the logic of my associate to its inevitable conclusion, the non-filing spouse would need to include all of his/her credit cards and any other liabilities (you don't get to pick and choose) thus destroying their credit as well. This can't be the way it works.

I would really appreciate any input anyone has, even if it just steers me in the right direction.

Alex

[OhioFiler]

I'm not sure I get why an attorney practicing bankruptcy law would be looking here for answers.

[axle619]

OK OhioFiler:

I just about give up. Judging on our interaction from my first attempt to contribute in another thread along with this question I posed, apparently you don't feel a practicing attorney would be a good contributor to this forum. That is sad.

I know from personal experience that forums have a wealth of information from all types of contributors. Often, you can glean good information from "non-experts". I was hoping to pop on this site, read about peoples' issues, and both contribute and learn.

I get that you are a major contributor, judging from your post count. And I certainly don't mean to disrespect someone who is most likely well regarded here. But you have been pretty dismissive with me already.

I started this thread to ask a question. Your response was neither helpful nor kind. I still encourage anyone to respond to this thread, but I suspect it will just die. Along with my participation in this forum, should this be the case.

Alex

[OhioFiler]

OK OhioFiler:

I just about give up. Judging on our interaction from my first attempt to contribute in another thread along with this question I posed, apparently you don't feel a practicing attorney would be a good contributor to this forum. That is sad.

I know from personal experience that forums have a wealth of information from all types of contributors. Often, you can glean good information from "non-experts". I was hoping to pop on this site, read about peoples' issues, and both contribute and learn.

I get that you are a major contributor, judging from your post count. And I certainly don't mean to disrespect someone who is most likely well regarded here. But you have been pretty dismissive with me already.

I started this thread to ask a question. Your response was neither helpful nor kind. I still encourage anyone to respond to this thread, but I suspect it will just die. Along with my participation in this forum, should this be the case.

Alex

I appreciate expert advice but I find it strange and scary for folks in California who may be reading here to find a bankruptcy attorney on this forum asking for advice.

Your attack on a well-respected, well-researched poster in another thread irritated me. If you wish to contribute by all means do so. If you want to flaunt your JD by asserting others' advice is dangerous expect to be addressed man to man.

Bankruptcy isn't kind.

[jribe]

Hi Alex,
I would recommend looking on PACER for your district (central?) and looking for cases similar to yours. If you don't find a defnite answer- i would go with the most used route. Luckily for your client- they are being represented so the Trustee will likely be a little kinder to the non-filing spouse.

I don't believe the law is very clear as far as your situation goes. It's surely not black and white.

IMHO - your opinon follows more closely with the rules of non-filing spouses. All assets are included in the filing; the creditors cannot go after the non filing spouse for debts included in the BK and as long as they stay married both are fine.

That would be the big if for this couple: if there is any doubt that they will stay married- both should file.

Good luck with your case!

Hi all.

An associate and I are bumping heads on an issue. We are both new to bankruptcy and practice in California. I am worried that he is doing something absolutely wrong and I am hoping someone here knows the answer.

Before I state the issue, I want to be clear that I am less asking for opinions (although for the sake of interesting discussions, it is welcome) and more hoping that someone could actually know the answer and preferably the code section or case. Additionally, I have researched it myself for quite a bit, but not found anything precisely on point. I am assuming this is because it is 1) obvious; 2) obscure; 3) routinely done incorrectly.

Facts: Married debtor filing chapter 7 without spouse. Non-filing spouse has credit cards in her name only. Non-filing spouse has a second mortgage on jointly-deeded home in her name only.

Issue: My associate believes that because we are in a community property state that non-filings spouse's personal liability, because community property would be liable for any claims, should be included in the filing spouses petition and subject to discharge (there is no separate property in this case so any discharge would cover them both). I disagree. I believe that until her personal liabilities are in default, and some type of claim is filed against her (and therefore against the community property), that they are not included.

My Reasoning: In California, it is quite often for one spouse to file for BK7 alone. The discharge will protect the community property of both spouses and any separate property of the non-filing spouse is only liable where the non-filing spouse actually had personal liability as well. This also serves to leave intact the credit of one of the spouses. If we were to follow the logic of my associate to its inevitable conclusion, the non-filing spouse would need to include all of his/her credit cards and any other liabilities (you don't get to pick and choose) thus destroying their credit as well. This can't be the way it works.

I would really appreciate any input anyone has, even if it just steers me in the right direction.

Alex

[whipster1]

Yep the non-filer is protected but if they split up all that goes out the window. The community debt creditors will go after her.

BTW the credit isn't destroyed, I have 4 active tradelines less than 2 months after discharge. Scores are going up every day.

I suggest you attend a few courses before representing someone in BK court, and make a friend with a long-time practitioner.

[optimistic1]

LoL,

Give the guy a break, I have met plenty of licensed BK attorneys who knew nothing of community property laws, and they are so stupid they dont even bother to research it, you can at least give him that.

Yes you need to report all of the community debt regardless of name or filing status, their credit will suffer as well, most likely from IIB (included in bankruptcy) notations on each account, but no public record of the filing itself.

Only FICO knows how they would score it based on those factors.

Besides, after my discharge, I got all kinds of new credit offers, they all came with a free shiny new shovel too.