Worried about my spouse

[Birn]

I filed a Chapter 7 business BK without my spouse. All of the bad debts are in my name only with no other co-signers. All my bad debts are associated with bad investment property mortgages and a couple of personal unsecured lines of credit that I used for the investment properties. However, I live in Texas which is a community property state. These investment properties were acquired while we were married. My joint debts with my spouse are all current and we intend to keep them (house, car, credit cards, etc.).

Let me correct myself, there is actually one construction loan we took out jointly for a new home to be built in another city. At the time, it was going to be our primary house. We decided not to move so we put it on the market while it was under construction. I've also included this debt in the bankruptcy. Every other bad debt is in my name only.

Is my wife going to be OK? My attorney says yes but doesn't really elaborate to me how. Can the creditors pursue my wife after I'm discharged even though she never signed on any of the bad debts (with the exception of the construction loan)? My wife has no income and no assets of her own. She's a homemaker. The reason I didn't want to include her in the first place was because she has perfect credit and I didn't want her credit to be affected.

My 341 is scheduled for April 24. I've thought about adding her to my BK petition. Should I have her added to the BK petition? I completed the pre-filing credit counseling but she hasn't.

I hope she's going to be ok. I'm just getting a little worried as I get closer to my 341 meeting.

Thanks

[lrprn]

My guess is that the reason your lawyer isn't worried about your wife is because from what you told us, she has nothing a creditor can take. She isn't employed so wage garnishment can't happen (and you're in Texas where wages can't be garnished anyway). You are surrendering the properties obtained during the marriage - if a creditor came after her for payment, what would she be able to give them? The creditors will see that it would do no good to pursue her because she has no money or assets of her own. Assuming that your wife does not intend to go to work or obtain assets of her own ever, then she'll be ok if she isn't included in your bankruptcy. However, if you two are younger and that is a possibility, then you should consider including her to protect her from creditor harrassment in the future.

One thing you didn't mention - if you are co-owners on your home where the two of you live now and your car(s), were you able to protect those assets with your Texas exemptions when you filed?

[Birn]

My guess is that the reason your lawyer isn't worried about your wife is because from what you told us, she has nothing a creditor can take. She isn't employed so wage garnishment can't happen (and you're in Texas where wages can't be garnished anyway). You are surrendering the properties obtained during the marriage - if a creditor came after her for payment, what would she be able to give them? The creditors will see that it would do no good to pursue her because she has no money or assets of her own. Assuming that your wife does not intend to go to work or obtain assets of her own ever, then she'll be ok if she isn't included in your bankruptcy. However, if you two are younger and that is a possibility, then you should consider including her to protect her from creditor harrassment in the future.

One thing you didn't mention - if you are co-owners on your home where the two of you live now and your car(s), were you able to protect those assets with your Texas exemptions when you filed?

Thanks for responding LRPRN. This forum is outstanding.

Yes, I was able to protect our home, vehicles, and possessions with the Texas exemptions.

My attorney explained that since Texas is a community property state, that all of our community assets are included in my BK estate when I file alone. He added that upon discharge, all community debts would be discharged as long as they were listed in the BK petition. Creditors won't be able to pursue any community assets post-discharge. The only exception is if my wife had separate assets she brought into the marriage, or any gifts and inheritances. Since my wife has no separate assets and no gifts/inheritances, there's nothing for any creditors to pursue.

My only concern is with the construction loan. My wife was named on that debt since it was going to be our residence. My attorney told me this morning that I shouldn't worry about this since there is very little chance the lender would pursue her.

He said the only bad thing for my wife is there would be a foreclosure on her credit when this house is surrendered and eventually sold. I guess the lender can either pursue my wife for a deficiency judgment or issue a 1099 for debt cancellation income. If they do a deficiency judgment, she appears to be judgment proof. If they do a 1099, we should be able to show that we were both insolvent under the IRS rules and thereby avoid paying the extra income tax.

Am I thinking this through correctly? Am I missing anything?

Thanks again

[Birn]

Any thoughts from anybody?

Thanks

[lrprn]

Any thoughts from anybody?

From what you've told us here, what your lawyer told you and what you are thinking is quite likely exactly what will happen. Good luck - hope everything works out as you hope and you two will finally feel some relief from the constant financial stress.