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Chapter 7 bankruptcy: Can creditor sue my ex-spouse or force her to sell her house to pay my debt after separation?

Campbell, CA |

We were married in CA, a community property state. Her name was never on the account.

During the marriage, this credit card account balance decreased by $4K. At the time of our separation, the balance on this credit card was about $650. After separation, the same account balance grew to $22K!

Now, I'm going to file Chapter 7 bankruptcy. I want to be sure that the creditor can not sue my ex-spouse or force her to sell her house to pay my debt incurred after separation. Her name is on the deed of a house, and there is more than 100K in equity. So, it might be worth forcing a sale.

However, it seems to me, and an attorney I consulted, that the increase in the credit card debt was my separate debt, and she could not be held liable for this debt, even though the same account was a community property account. In addition, our settlement agreement includes the following: "Husband and Wife each warrants to the other that, after the date of this agreement, no debt or obligation will be incurred for which the other may be liable, or that could be enforced against an asset held by the other. We agree that if any claim be brought seeking to hold one liable for the subsequent debs of the other, or an undisclosed obligation of the other, or for any act or omission of the other, then each will hold the other harmless, defend such claim, and indemnify the other for any liability on the obligation, attorneys’ fees, and related costs. " Thank you!

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Attorney answers 4

Best Answer
Posted

CC lenders rarely pursue collection from a non-signer. The only exceptions might possibly be if the debt was incurred for the common necessaries of life for the non-signing spouse. These include, medical care, shelter, clothing, and food. You could be sued for non-payment of the debt, and if neglected, the court could grant a default judgment against you. If you have an interest in real estate along with your ex, a judgment lien can be recorded against that property. A BK will discharge personal obligation on the debt, but a judgment lien must be affirmatively avoided if it impairs your homestead exemption. If you don't live in the property, you can't claim a homestead exemption. If title to the property is held jointly with your ex, you could have an issue in your BK. Best advice: don't neglect a summons from the CC creditor. Make sure you file your BK before any judgment is rendered or before any judgment lien gets recorded. BTW. a CC lender whose debt goes from $650 to $22K may take a hard look at whether or not they file an objection to the discharge of their debt pursuant to 11 USC §523. If the debt was incurred without any intention of repayment, it may be possible for them to try and prevent your getting a discharge of the $22K debt. Consult a good BK lawyer in your area and don't go it alone.

Asker

Posted

Thank you, Mr. Steingraber, for going the extra mile, on this. I own no real estate, only exempt personal property. I'm judgment proof. I always intended to repay this CC debt, as it gradually increased to $22k. It was 98% non-luxury items. Things just got out of hand, regarding my ability to repay. I successfully defended myself against a junk-deb-buyer, recently. Considering the non-luxury expenses, the gradual increase in the balance, my intention of repayment of the $22k CC debt and my ability to defend myself, do you still think it's important to consult a BK lawyer? If so, why is it important to be in my area, when it's federal law? Is that because the local attorney may be familiar with the local bankruptcy court's rules and procedures? Thank you!

Posted

This is a family law/community property question. While the finer points of community property law vary some from one state to another among those that have adopted it, one common feature is joint and several liability for all debt incurred during the pendency of a marriage. In my state by case law the concept of separate debt (incurred without the knowledge or consent of the other party and without benefit to the other or community) has been created. In the absence of such law, any creditor can indeed pursue the marital partner, even where their name was not on the account. Creditors are very swift to remind parties that creditors are not bound by any agreement of the parties. Moreover, any attorney will build into a marital agreement mutual indemnification, and that obligation is non-dischargeable in bankruptcy.

Be aware that the intersection of community property law and bankruptcy is full of landmines for the unwary, and the potential for costly unwelcome consequences is ever present. Finding an attorney with deep community property law experience and familiarity with bankruptcy make take some effort, but is what you need.

Best wishes for an outcome you can accept, and please remember to designate a best answer.

This answer is offered as a public service for general information only and may not be relied upon as legal advice.

Lisa Jane Espada

Lisa Jane Espada

Posted

I think this response is very confusing. The question states that all but $650 of the debt was incurred after the couple separated. It's not community debt. This response makes it appear that the creditor of this debtor's separate debt can and might pursue the ex-spouse after he discharges this debt in bankruptcy. That is extremely unlikely, and there would be a complete defense to such an action.

Asker

Posted

Nice catch, Ms Espada. I wanted a second opinion, and the consensus appears to confirm your interpretation of my case.

Posted

Debt incurred after the date of separation is not community debt. Interestingly, if her name were on the account, they could go after her for the full amount of the debt ... because a state's community property law is not binding on a creditor. But, since her name was never on the account, they will not go after her.

Posted

The Homestead law protects a person from having their home sold in order to pay any court judgment. The first thing that would have to happen is that the creditor would need to name your ex in a lawsuit to collect this debt. Only if the creditor won this lawsuit would your ex's property be in jeopardy, and only to the extent that the creditor could place a lien on the property which would have to be paid should she sell or refinance the home. Hope this perspective helps!

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