There are really two sides to this question. In bankruptcy, we're mainly concerned about two things: your debts and your property.
DEBTS
In Ohio, when one spouse files it does not affect credit of the non-filing spouse. As long as the non-filing spouse has not co-signed or otherwise used the credit of the filing spouse, they will not be held liable for the debts of the filing spouse.
One thing to keep in mind, however, is the situation in which both spouses have co-signed for a loan or are jointly liable for a debt. In that circumstance, one spouse's bankruptcy filing does not relieve the other of liability for the debt. The non-filing spouse is fully liable. One caveat to this is if the debtor is filing a Chapter 13 bankruptcy and is re-paying a consumer debt in full through their plan. In this circumstance, the bankruptcy code has a "co-debtor stay" in effect that protects the co-debtor from the creditor (11 U.S.C. 1301).
PROPERTY
As a general rule, any property that is solely in the name of the non-filing spouse cannot be touched by the bankruptcy trustee. One thing to keep in mind, however, is the concept of fraudulent transfers. In Ohio, the trustee can look back up to four years at any property the debtor has transferred out of his or her name. If the debtor transferred property out of his or her name to the non-filing spouse, the trustee may be able to reclaim that property from the spouse.
Also, joint property can be an issue if there is equity in it. For example, if a couple owns a home worth $100,000 that has no lien on it, the trustee may end up selling the house. The debtor owns a 50% interest ($50,000), but Ohio bankruptcy exemptions only cover $21,625 worth of equity. The trustee could then sell the house, give the non-filing spouse the value of their interest, give the debtor the value of their exemption, and give the rest to creditors. This is the sort of situation that can result in the loss of a home, a car or any other jointly titled property. An experienced bankruptcy attorney should be able to point out these potential pifalls before you file your case.
For more information on Chapter 7 and Chapter 13, visit my website at http://www.ohiobankruptcyrelief.com/.
Ed, what happens if a divorce gets in the mix? Say, during the pendency of a divorce, a vengeful spouse charges up a cc that is jointly owned, then files bankruptcy? Can creditors go after the other spouse?
ReplyDeleteOr how about this one: in a divorce decree, one spouse agrees to take on like 75% of the debts. Down the road, that spouse files BK. Can creditors go after the other spouse? [I'm pretty sure they can.]
One spouse running up a credit card does not make the other liable, divorce or otherwise. Of course, if the creditor pursues the non-filing spouse, that spouse may need to go to the trouble of defending himself or herself in court against the creditor.
ReplyDeleteAs for the second question, the agreement by the spouses is not binding upon creditors. As such, the creditor can pursue the non-filing spouse. However, the separation agreement may remain binding between the spouses and the non-filing spouse may still be entitled to indemnification from the filing spouse.