Spouse Not Filing - Would CC companies come after her?

[yomann]

I'd just suggest people in community property states speak with a few lawyers about this topic.
More than a few attorneys disagree with the majority of the conclusions posted here..................

Thanks for your post and references - that makes more sense.

[backtoschool]

I'd just suggest people in community property states speak with a few lawyers about this topic.
More than a few attorneys disagree with the majority of the conclusions posted here.

http://www.moranlaw.net/alone.htm

Community property discharge

When one spouse files bankruptcy in a community property state, the marital community enjoys the protection of the filing spouse's bankruptcy discharge. Section 524 of the Bankruptcy Code provides that any community property that the filing spouse and the non filer acquire after the bankrutpcy is protected from creditors of the non filer who held a claim against the non filing spouse as of the date of the filing.

A creditor with a claim against the non filing spouse can only collect its debt from the separate property of the non filing spouse. In California, that separate property is comprised of assets acquired before marriage; assets acquired by gift during marriage; or assets acquired by inheritance.

Creditors, despite the fact that the community property discharge has existed since at least the passage of the Bankruptcy Code in 1978, have a hard time believing that someone in a community property state gets the benefit of their spouse's bankruptcy discharge, but that's the law.

Here is 524 of the bk code.

http://doney.net/bkcode/11usc0524.htm

3) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this title that is acquired after the commencement of the case, on account of any allowable community claim, except a community claim that is excepted from discharge under section 523, 1228(a)(1), or 1328(a)(1), or that would be so excepted, determined in accordance with the provisions of sections 523(c) and 523(d) of this title, in a case concerning the debtor's spouse commenced on the date of the filing of the petition in the case concerning the debtor, whether or not discharge of the debt based on such community claim is waived.

I disagree with part of this interpretation, although I see your point. A lot of unsecured debt is treated not just as community debt but also as debt by two co-signers. In a community property state, the non-filing spouse is often considered a co-signer on the debt and therefore liable. So if both spouses signed the credit card agreement, then they can go after the non-filing spouse.

In short, when only one spouse declares bankruptcy and receives a discharge, an injunction typically issues that prevents creditors who are owed pre-petition debts from collecting on after-acquired community property. See Brown v. Kastner (In re Kastner), 197 B.R. 620, 622 (Bankr. E.D. La. 1996). A creditor can preserve his right to collect on after-acquired community property by bringing suit against the non-debtor spouse to determine if the debt is hypothetically non-dischargeable as to that spouse. Id. at 622-23. Collier on Bankruptcy states that the purpose of these statutes is to prevent a "wrong doing" non-debtor spouse from receiving a discharge through an innocent spouse in bankruptcy. 3 Collier on Bankruptcy P 524.02[3] at 524-28 (15th ed. 1996).

So....if the non filing spouse signed the credit agreement, that non-filing spouse can still be sued. There is some protection afforded, but creditors are still allowed to sue.

[yomann]

......................So....if the non filing spouse signed the credit agreement, that non-filing spouse can still be sued. There is some protection afforded, but creditors are still allowed to sue.

My wife did not sign the credit app for Discover, (that was 20 years ago) but I put her name down for a secondary card, which she got but never ever used.
The CA claims she is responsible for the balance, as they have her social sec. #.
They could easily have picked that info up from my BK filing, or they could be bluffing ?
I was not worried about it, until I saw this thread.

[keepmine]

I disagree with part of this interpretation, although I see your point. A lot of unsecured debt is treated not just as community debt but also as debt by two co-signers. In a community property state, the non-filing spouse is often considered a co-signer on the debt and therefore liable. So if both spouses signed the credit card agreement, then they can go after the non-filing spouse.

In short, when only one spouse declares bankruptcy and receives a discharge, an injunction typically issues that prevents creditors who are owed pre-petition debts from collecting on after-acquired community property. See Brown v. Kastner (In re Kastner), 197 B.R. 620, 622 (Bankr. E.D. La. 1996). A creditor can preserve his right to collect on after-acquired community property by bringing suit against the non-debtor spouse to determine if the debt is hypothetically non-dischargeable as to that spouse. Id. at 622-23. Collier on Bankruptcy states that the purpose of these statutes is to prevent a "wrong doing" non-debtor spouse from receiving a discharge through an innocent spouse in bankruptcy. 3 Collier on Bankruptcy P 524.02[3] at 524-28 (15th ed. 1996).

So....if the non filing spouse signed the credit agreement, that non-filing spouse can still be sued. There is some protection afforded, but creditors are still allowed to sue.

I think we'll have to agree to disagree on this one.
I'd suggestion anyone filing solo in a community property state really grill any prospective attorney about how the non filing spouse may be affected. Just in a cursory search, I found a number of lawyers websites dealing with this issue and claim the non filing spouse has protection. The degree they're protected seems to deal with any separate property they may own.
Just an ex:

http://www.marleneweinstein.com/indexpage_7/Articles_2.shtml

[optimistic1]

I can put this topic to bed, as I have first hand experience being sued in a community property upon which only one spouse files for bankruptcy.

Like KEEPMINE has posted, community debt that is discharged by one spouse will entitle the non-filing spouse to also receive a hypothetical discharge, which will stop lawsuits from garnishing community wages.

Many people have the whole idea completely backwards and have no clue what they are talking about when they make posts. Dont feel bad though, because attorneys on both sides dont even have it right, only some of them understand how it all works, but alot of attorneys representing debtors like to have both file, because it makes it easier, and it prevents the non-filing debtor from having to defend themselves in pointless lawsuits, if they ever even occur.

I was named in a lawsuit in which I did not sign for the card or made purchases. However it was a community debt, and we had only one spouse file, then it was discharged, and the case was dropped against me, they did not pursue it any further, for the simple fact that they would lose, based on a ninth circuit court of appeals decision.

There are instances in which a creditor can try to object to the dischargeability of the non-filing spouse, but this must be completed before the deadline in the filing spouses Chapter 7.

Read this article, that is written by a reputable attorney that practices BK law in a community property state, and you all will understand what I am talking about.

Creditors can name and sue for community debts, but if it gets discharged, section 524 holds, and its too late for them, they waived their right along time ago during the filing spouses case. Most creditors aint gonna bother, trust me, I speak from experience.

http://www.furlonglawaz.com/files/37871308.pdf

This should put all debates to bed about the intricacies of community property laws and how they interact with a bankruptcy filing and discharge.