Get a Free Ride Through Bankruptcy When Your Spouse Files Alone

Categories: Family Law and Bankruptcy

Here’s the case:

A debtor’s discharge in bankruptcy would not do her much good if her prepetition creditors could still garnish her wages to pay their claims. The creditor in this case has a creative theory for doing just that: he argues that her discharge did not affect his claim against her husband, that her husband had an interest in her wages as community property, and that her husband fraudulently transferred that interest to her by entering into a postnuptial agreement. The creditor’s fraudulent transfer claim, besides being untimely, is barred by [**2] Section 524(a)(3), n1 which enjoins holders of pre-petition community claims from collecting or recovering from community property acquired post-petition. Rooz v. Kimmel (In re Kimmel), 367 B.R. 166, 167 (Bankr. N.D. Cal. 2007)

11 U.S.C.S. § 524(a)(3) protects a discharged spouse in a community property state from any action, process, or act to collect or recover from, or offset against her wages on account of a Judgment against the other spouse. 11 U.S.C.S. § 524(a)(3). After-acquired community property will be free from prebankruptcy creditor claims against either spouse even when only one spouse has filed a bankruptcy case. California is community property state.

With every bit of good news comes a CAVEAT:  The Community Property discharge will protect the non-filing spouse so long as the spouses remain MARRIED. We all know that you can only file bankruptcy once every eight years.  Another benefit to having only one spouse file bankruptcy is that not only do you eliminate all the community’s debts, your spouse can file bankruptcy at any time during the next eight years, should your financial situation worsen. 

Photo Credit: ngillespiephoto

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