Community property filing - Credit impact of non-filing spouse

[Grumpy2]

I am presently working on our petition to file Chapter 7 jointly. However, I came across some information stating that in a community property state, one spouse can file and get a discharge while the non-filing spouse gets a "phantom discharge" as long as the marriage continues. Will the non-filing spouse have negative items on their credit report? If I can preserve my wife's good credit it will help us purchase a modest vehicle at a reasonable interest rate and help with a future home purchase down the road. Does anyone have experience with this?

[AngelinaCatHub]

I'm not at all familiar with CA law, but here in FL I have found that most lenders wish both spouses to sign a contract on most loans. Of course it depends on that loaner as to this fact. But, doing so, binds both, either, or, to that contract and yes it would affect either here in our state. I think it depends upon the paper signed. 'Hub

[Grumpy2]

I believe Florida is a common-law state. A creditor could certainly go after a non-filing spouse that signs the loan docs in Florida. In a community property state, the community assets all go into the bankruptcy estate and are liquidated. So even if the spouse doesn't file, the asset and loan are wiped out as long as they remain in a community arrangement. If you get divorced, then the creditor could go after the spouse. I am just curious what happens to the credit report of the spouse that didn't file.

[LadyInTheRed]

As I understand it, the non-filing spouse's debt is not discharged, but creditors cannot collect against community property. The creditor can still get a judgment against the non-filing spouse. If the non filing spouse has separate property, then a judgment creditor can collect that property. If the non-filing spouse ever inherits property or receives a gift, that would be separate property that a judgement collector can go after. Also, as you already stated, if there is a divorce, whatever assets the non-filing spouse receives in the divorce is fair game for creditors. I also think the same would be true if the filing spouse dies since the marriage ends with the death and you can't have community property without a marriage.

Have you consulted with any bankruptcy attorneys? Please confirm this information with an attorney.

[Grumpy2]

Ok. Based on what you said, it looks like her credit will be trashed either way. I consulted with an attorney previously, but he wanted over 2k for a no asset, no real estate filing....

[LadyInTheRed]

Ok. Based on what you said, it looks like her credit will be trashed either way. I consulted with an attorney previously, but he wanted over 2k for a no asset, no real estate filing....

That's about what a BK costs in California. For most people, it is a small price to pay compared to the debt that is discharged.

Re your wife's credit: If her name is on delinquent accounts, that will show up on her credit report. But, there should not be a bankruptcy on her report if she does not file. If accounts are in your name alone or she stays current on any account with her name, your BK probably won't affect her credit.