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  • Spouse filing bankruptcy

    My wife in mulling a bankruptcy filing in NY ( total of $45,000 in
    credit card and car loan debt). She racked up these balances prior to
    our wedding last year. My credit is excellent, and the house is in my
    name. We do not have any joint financial accounts (although we do file
    a joint tax return). In the event of a bankruptcy, can her creditors
    come after me?

    Also, she has a lawsuit stemming from an earlier car accident pending
    in the legal system. Assuming she files bankruptcy, what will happen if

    she subsequently collects any damages? Will the court deflect those
    proceeds to her creditors?


  • #2
    Spouse filing bankruptcy

    >In the event of a bankruptcy, can her creditors
    come after me?

    I saw this question somewhere else. And I was dumb enough to answer
    it. So I may as well be dumb enough again. This advice is worth at
    most what you are paying me for it.

    OK: yes, your wife's creditors can go after you (although the main
    point of bankruptcy is to stop them from going after you.) It's
    helpful that the house is in your name--- but that doesn't offer 100%
    protection. For example, if she helped pay for it, the creditors could
    claim that this is in fact one of her assets.

    One of the many questions your wife would have to answer on the
    bankruptcy paperwork would be whether she is involved in any lawsuits,
    either for or against her. The possible payoff from the lawsuit would
    be one of her assets. If the payoff seems to be certain and
    substantial, the bankruptcy trustee might hold things up until the
    money arrives. If your wife is the defendant, the plaintiff would be
    one of her creditors (if she loses.)

    Comment


    • #3
      Spouse filing bankruptcy

      [email protected] wrote:
      My wife in mulling a bankruptcy filing in NY ( total of $45,000 in credit card and car loan debt). She racked up these balances prior to our wedding last year. My credit is excellent, and the house is in my name. We do not have any joint financial accounts (although we do file a joint tax return). In the event of a bankruptcy, can her creditors come after me?
      Only if there is a NY statute allowing it, or you are a co-signer on
      the debt(s). Generally speaking, the separate debts of a person cannot
      be imputed to their spouse (although collection agencies would like
      people to think they can be). In most cases there is little practical
      difference because an individual debt can be collected from most
      jointly owned assets. But a bankrupcty halts collection efforts under
      penalty of contempt of court, and usually discharges most or all of the
      debts. In your case it appears as if your separate assets may be
      beyond reach of your wife's creditors.
      Also, she has a lawsuit stemming from an earlier car accident pending in the legal system. Assuming she files bankruptcy, what will happen if she subsequently collects any damages? Will the court deflect those proceeds to her creditors?
      Upon filing bankruptcy, her unliquidated accident claim becomes an
      asset of the bankrupcty estate, to the extent that she does not
      exercise an exemption to keep it. The trustee in bankrupcty becomes
      the equitable owner of the claim and has the right to dispose of it as
      he deems fit (with the approval of the bankruptcy court). The trustee
      also takes over control of the accident case. Trustees have been known
      to fire the plaintiff's attorney and hire someone else to take over
      (although this is the exception rather than the rule). If and when the
      accident claim is paid, the proceeds go to the trustee, who uses them
      to pay case administration expenses and creditor claims, and then pays
      the remainder to the plaintiff.

      Comment


      • #4
        Spouse filing bankruptcy

        > In your case it appears as if your separate assets may be
        beyond reach of your wife's creditors.
        There are a couple of options which the OP didn't mention.

        #1, he can go ahead and pay off the debt. That would definitely put
        what's left of his assets out of reach of his wife-s creditors :-)

        #2, he can declare bankruptcy (or do a debt-counseling program)
        himself--- either jointlky with his wife or even on his own.

        Comment

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