Community Property States

[optimistic1]

From Cathy Moran's Blog from her website,






The fact that debt collectors are only marginally acquainted with the law was highlighted today when a client reported that her ex husband had been told by a debt collector that the former marriage made him personally liable for his exwife’s debts.

There must be an emphatic, yet polite, word for b***s****. Wish I knew it… “Balderdash” seems so weak. In my most generous view, this could be debt collectors from outside of California who are clueless about community property law. Or, more realistically, they’ll say whatever they think will scare a payment out of someone.

For the record, living in a community property state such as California does not make each spouse personally liable for the contractual debts incurred by their spouse. If your spouse in California takes out a credit card and runs up a balance, you are not liable to the card issuer for the debt. The community property is liable for the debt, but you are not liable. If there is no community property, by reason of divorce or a marital property agreement, then only the person who contracted the debt is liable for it.

This is but one of the “whoppers” told by debt collectors. Engage skepticism when dealing with this breed.

http://www.moranlaw.net/blog/category/dealing-with-debt

[optimistic1]

They can "come after him" only in bankruptcy court, or after the community discharge for separate property. But if one files, they cannot continue any collection activity on the non-filing spouse or its a violation of the stay.

This is not my personal thread, but in your post you started stuffing words in my mouth, so I couldn't help it.

[WhatMoney]

You came across one little link on the net and your gonna come in here and start making people trip out about being in a community property state.

The article I referred to asked and answered this question: "If one spouse is filing an individual bankruptcy petition, is the other, non-filing spouse’s property part of the estate?"
And also this question on exemptions: "What about exemptions though? The non-filing spouse has to give up community property entirely but, because only one spouse is filing, can the couple still receive the benefit of combined exemptions?"

The article was entitled Bankruptcy in Community Property States, written by an Arizona bankruptcy law firm. The advice they gave (and I referred to) is the same as you just gave - so what is your problem? I didn't realize this was your own personal thread - I'll not try to help again.

[optimistic1]

He didn't say he was divorced. Any shared assets between his wife and him in his community property state might be reason to come after those assets. I suggest he read the link I provided and ask his lawyer.

I never even typed the word divorce in my post, and if you were really smart, you would understand why I typed family law, family law attorney's deal with very complex issues regarding debts when couples divorce one another, especially in community property states. You came across one little link on the net and your gonna come in here and start making people trip out about being in a community property state.

I'm talking after the bankruptcy discharge, not during the case, everyone knows in a community property state all of your assets are combined regardless, its no secret you need to research the internet for.

And like I said, if the debts were incurred during the marriage, then he should be safe, during and after the case is discharged, they are all community debts.

Yes, creditors can come after any community assets that belong to either spouse, the underlying issue is the debt, of which they are trying to discharge by having one spouse file on behalf of the community.

Further, he should worry about his sole and seperate property, inheritance, cars, boats, planes, houses that were owned by him prior to getting married. These are the types of property that a creditor could collect from the non-filing spouse in a community property state, even after a discharge for the community.

SOURCE: My case is exactly like his, I retained counsel that is in touch with the comm. prop. laws.

[WhatMoney]

As long as all of the debt was incurred during the marriage, and that there are no special circumstances around the individual debts. Granted, you will need to find an attorney that understands family law and bankruptcy law, and a full understanding of how they mingle with each other when filing bk.

He didn't say he was divorced. Any shared assets between his wife and him in his community property state might be reason to come after those assets. I suggest he read the link I provided and ask his lawyer.

[optimistic1]

my wife owes about $200K due to a failed business. Around $120k is on credit cards, about $30K is taxes and the rest to vendors. Everything is under her name. I have good credit and have kept current on all my debt.... ie home loans, car loans, 1 credit card for about $1K. Can she file for bankruptcy without her creditors coming after me? That way I maintain my good credit. We are in Az and will meet with attorney next week. Thanks!

As long as all of the debt was incurred during the marriage, and that there are no special circumstances around the individual debts. Granted, you will need to find an attorney that understands family law and bankruptcy law, and a full understanding of how they mingle with each other when filing bk.

[WhatMoney]

http://www.azlegalmarketingconsultan...rty-state.html
.

[azpt22]

my wife owes about $200K due to a failed business. Around $120k is on credit cards, about $30K is taxes and the rest to vendors. Everything is under her name. I have good credit and have kept current on all my debt.... ie home loans, car loans, 1 credit card for about $1K. Can she file for bankruptcy without her creditors coming after me? That way I maintain my good credit. We are in Az and will meet with attorney next week. Thanks!

[optimistic1]

If anyone knows collection law and community property rules, the IRS does. But of course, if I dont say someone else will, local rules apply, always consult with proper counsel before attempting anything, these rules apply solely to the Federal Govt and will supersede any state law. But it is still very informative, in regards to bankruptcy and the effects of discharge and other such rules.

This is what the IRS uses when collecting from citizens, and how community property rules apply, there are plenty of citations to case law and everything. Note the stuff at the end, its the best.

http://www.irs.gov/irm/part25/irm_25-018-004.html

[shaedes]

Thanks Optimistic1, you've been a great help.

[optimistic1]

I would still list your debt, as any of it, he is liable for, until discharge. If you divorced one another, or if you die by chance, they could have the right to collect from him, if you don't list them on the schedule. Just keep paying your debts as normal. Its up to you though, and your attorney to help decide.

[shaedes]

So is it ok for hubby to not list my debt in his case. We can manage my debt ok, and I really have no sole and separate property for creditors to come after anyway.

[optimistic1]

Wow, this gives me a lot to think about. If my debt is included in my hubby,s case and my creditors don't notice my prior bk, or fail to object to the dischargeability of my debt during my hubby's case, then my debt would be forever extinguished through his bk. Am I getting this right? And I wouldn't be doing anything illegal by adding my debt to his bk. What if my creditors did notice my prior bk and objected to the discharge of my debt, could I be charged with fraud because I knew I had a prior bk?

No you would not be charged with fraud. However in thinking about this stipulation in the code more thouroughly and reviewing the case law. You would not be able to do this, as you posted this,

My hubby wants to file ch 7. We have been married 5 yrs, and I had a bk discharged a few months before we married. Since we live in California, can he still file ch 7 and have my debts(that were acquired during the marriage) discharged too?

does not apply if--
(1)

(A) the debtor’s spouse is a debtor in a case under this title, or a bankrupt or a debtor in a case under the Bankruptcy Act, commenced within six years of the date of the filing of the petition in the case concerning the debtor; and

(B) the court does not grant the debtor’s spouse a discharge in such case concerning the debtor’s spouse; or

(2)

(A) the court would not grant the debtor’s spouse a discharge in a case under chapter 7 of this title concerning such spouse commenced on the date of the filing of the petition in the case concerning the debtor; and

(B) a determination that the court would not so grant such discharge is made by the bankruptcy court within the time and in the manner provided for a determination under section 727 of this title of whether a debtor is granted a discharge.

[shaedes]

Wow, this gives me a lot to think about. If my debt is included in my hubby,s case and my creditors don't notice my prior bk, or fail to object to the dischargeability of my debt during my hubby's case, then my debt would be forever extinguished through his bk. Am I getting this right? And I wouldn't be doing anything illegal by adding my debt to his bk. What if my creditors did notice my prior bk and objected to the discharge of my debt, could I be charged with fraud because I knew I had a prior bk?

[optimistic1]

There is an argument to that, and it would be if the trustee/judge caught it or not. I remember reading in the code somewhere about it wouldnt be, because technically you cant discharge yours because you filed 8 years ago, even though you aren't on the petition. That is exactly what I am trying to do, but its a very complicated question that only highly experienced lawyers could tell you. I have not come across many of those, but they do exist.

I was wrong here, but who knows, from the case law I am reading, it really has nothing to do with the trustee or judge, it has to do with whether or not the creditors will pay attention, and object or not. If they dont object, you get away with it.