310.376.9865
A frequently asked question is, I am the only one responsible for the debt, does my wife have to file bankruptcy also?
This is a frequently asked question of bankruptcy attorneys, if I file bankruptcy and my spouse doesn’t will the creditor come after my spouse?
Community Debts?
The first thing a California bankruptcy lawyer will look to is the California Family Code, and guess what, there is no definition of a community debt. Referring to California Family Code 902, a debt is an obligation incurred by a married person before or during the marriage… However, no definition of community debt.
Proceeding on to Family Code Section 910, the community estate is liable for a debt incurred by either spouse during the marriage, again no mention of community debt. Essentially, community estate (community property) is liable for “any” debt incurred during the marriage. However, lets proceed to the U.S. Bankruptcy Code.
Community Debt in Bankruptcy
While there is no definition of community debt, the Code does refer to a “community claim.”
So, again the question, if one spouse files, is the other spouse or his/her share of the community property become liable for the debt discharged in bankruptcy?
1. The Filing Spouse receives a discharge for his debt.
2. Non-Filing Spouse- also receives a discharge, under 11 USC 524(a)(3) the non-filing spouse receives a discharge to those debts that could be considered community claims. This community discharge prevents the creditor from collecting from present and future community property or wages of the couple, EXCEPT – this is only applicable if you remain married. Once you divorce, the non-filing spouse’s wages are subject to wage garnishment, if the creditor is aware of the divorce.
HYPOTHETICAL:
Herb & Wilma, who reside in California, a community property state, have been married for 15 years. Wilma has been using her credit cards and incurred medical bills, and now has to file bankruptcy.
Property Owned by the Couple:
1. Herb inherited $7,500 from his aunt during the marriage, and deposited into a bank account in his name only.
2. During the marriage the couple purchased and paid in full a 1950 Corvette.
After Wilma files bankruptcy, what happens to their property.
1950 Corvette – community property. Since it is community property, 100% of the property comes into the bankruptcy estate, Herb looses his community property interest, and the car is sold and any non-exempt portion is paid to the creditors.
Herbs Inheritance: Herb never agreed to be responsible for Wilma’s debts. However, these debts incurred during the marriage are “community claims” Wilma’s liability is discharged by the bankruptcy. Herb’s liability is discharged by the “bankruptcy community discharge,” and the creditors can not collect his from his future community property or wages.
Bank Loan incurred by Herb during the marriage:
The community estate is liable for a debt incurred during the marriage.
Wilma’s bankruptcy will discharge this debt, and she will no longer be liable.
The community discharge will prevent the Bank from collecting Herb’s future wages, or any community property.
However, the Bank may pursue Herb’s separate property bank account where the inheritance is held.
* DISCLAIMER: The content of this website is intended for informational purposes only. Nothing herein is intended to form the basis of an attorney-client relationship or constitute legal advice.
* Los Angeles/Orange County Bankruptcy Attorney
- Law Offices MJ Mann Bankruptcy Attorney
- 2706 Artesia Blvd, Suite BK
- Redondo Beach, CA 90278
- 310.376.9865
