Even if a person hires a bankruptcy Lawyer In Puyallup Wa and files individually, his or her spouse may feel the effects. The way debts and assets are treated during bankruptcy depends on whether the state has common or community laws on marital property. Here, readers can learn what happens to property and debts when only one spouse files for bankruptcy.
Community vs. Common Law Property Rules
State laws affect a person’s rights to property acquired during a marriage. Common law states follow equitable distribution rules, and community property states consider most assets to be jointly owned regardless of whose name is on the title. The assets to be included in a bankruptcy depend on where the spouses live.
Which Property is Included in a Bankruptcy
In common law states, separate property and shares of jointly owned assets become part of a spouse’s bankruptcy filing. This means that if exemptions aren’t sufficient to cover the assets, they can be seized and sold by a court-appointed trustee to pay creditors.
The other spouse’s separate property and his or her portion of jointly-owned assets aren’t included. However, if the couple has non-exempt property, the trustee may still be able to force a sale to get to the filer’s portion. If the property can’t be divided, the trustee must demonstrate that the sale’s benefit outweighs the harm to the owners.
A bankruptcy discharge eliminates a debtor’s obligation to pay dischargeable joint and separate debts. However, the discharge does not affect the spouse’s responsibility toward joint debts.
Property Included in Bankruptcy
All community assets are included in the bankruptcy even if only one spouse files. Therefore, more property is at risk when a person files alone in a community property state than in one that follows common law. A spouse’s separate property is not included, but in many cases, it must still be disclosed so the trustee can verify that it is separately owned.
Bankruptcy cases can be very complex, even under the best of circumstances. However, a bankruptcy Lawyer In Puyallup Wa can provide case-specific advice. Call a local attorney today to set up a free initial consultation.