How to List Your Spouse in a Bankruptcy to Discharge Community Debt

By Mary Jane Freeman

For spouses who live in community property states, most property and debts acquired during the marriage are considered under the joint ownership and responsibility of both spouses. So unless you list your spouse as a co-debtor on the bankruptcy petition, she will likely remain on the hook for your shared debts, even if your individual responsibility for them was discharged by the bankruptcy.

Community Debt

There are currently nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, property and debt acquired during the marriage is considered the joint property of both spouses, except inheritances and gifts made to one spouse only, which remain the separate property of that spouse. As a result, in community property states, each spouse is entitled to a one-half share of all marital property and equally responsible for all community debts, also known as marital debts.

Petition for Bankruptcy

To begin the bankruptcy process, you will first need to file a petition. As a married person, you have the option of filing by yourself or together with your spouse. To file with your spouse, you must complete and file a joint petition, a form specifically crafted for married persons filing jointly. You will include your names and addresses, Social Security numbers, and general debt information. Both you and your spouse are required to sign the petition and attach schedules detailing your joint income, expenses, and separate and community assets.

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There are two common forms of personal bankruptcy: Chapter 7 and Chapter 13. If you file for Chapter 7 bankruptcy, your assets will be seized and liquidated to pay your creditors. If you file for Chapter 13 bankruptcy, you won't have to give up any assets; instead, you'll pay some or all of your debts through a court-approved repayment plan lasting three to five years.

Co-Debtor Stay

In both a Chapter 7 and Chapter 13 bankruptcy, an "automatic stay" goes into effect the moment you file. This stops creditors form coming after you while the bankruptcy is in progress. A Chapter 13 "co-debtor stay" prohibits creditors from attempting to collect from your spouse during the bankruptcy. The downside of this stay is it only applies to consumer debts and lasts until the Chapter 13 discharge is complete.

Community Discharge

If you live in a community property state, your spouse is automatically protected by what's known as a "community discharge." This means that if you discharge community debt through bankruptcy, even if you filed alone, that discharge extends to your spouse as well; creditors are prohibited from attempting to collect the debt from your spouse's share of the marital property, both presently and acquired in the future. However, this protection is not without its limitations. Although creditors are unable to collect from community assets to satisfy community debt, they may pursue your spouse's separate property. Furthermore, the community discharge only lasts for the life of the marriage. So, if you divorce your spouse in the future, she will no longer be protected by the community discharge.

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Bankruptcy & Community Property



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