what happens to joint debts when only one party files BK?

Date: Tue, 06/03/2008 - 19:20
Submitted by on Tue, 06/03/2008 - 19:20
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As the title states, what happens to the debt when it comes to the person that did not file BK? How does that work? Does the debt continue on for that person like nothing happened, or is there something else that takes place?

Thanks in advance


I believe it depends on what state you live in. There are some states that are community property, meaning if one spouse files, the other is liable on joint debts. But in non-community property states, if one spouse files and you have joint accounts, as long as the other spouse continues to pay on the loans, the creditor should be good with that.


Submitted by on Wed, 06/04/2008 - 06:36

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Guest-
I interpret what you just wrote to imply that either way, the co-signer has to pay if the primary files for BK.

When a creditor asks for a co-signer, it is for the purpose of guaranteeing payment. So if one of them does not pay, the creditor can go after the other.

If there are specific state laws differing from this, please feel free to share!


Submitted by desperatelyseekingsanity on Wed, 06/04/2008 - 07:49

desperatelyseekingsanity

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I found this but am not sure how accurate it is:
Joint debts
Quote:

If you and your spouse are jointly liable to a creditor, the bankruptcy of one spouse does not relieve the other of paying the debt. Upon a bankruptcy, the creditor may look to the other spouse for payment, unless the bankruptcy case is under Chapter 13. If the debt is a consumer debt to be paid 100% through the Chapter 13 plan, the co debtor is protected by the codebtor stay in ????1301.

Generally, marriage alone doesn't make both spouses personally liable for a debt. Liability on contracts such as home loans and credit cards arises by agreement between the creditor and the debtor. Only persons who signed the loan or credit application are liable for the debt.

A joint tax return, however, makes both spouses liable for the total of the tax due.

If you have joint debts, you can expect the bankruptcy to be noted in some way on the credit record of the non filing spouse. There is uncertainty in the law at the moment as to whether it is proper to mention the bankruptcy of one debtor on the credit report of a debtor who is not in bankruptcy.

Joint property
If you and your spouse own property together, that property may be included in the bankruptcy estate and be potentially available to pay creditors. In community property jurisdictions such as California, both halves of the community property comes into the estate: all of the community property is available to pay community creditors and any other creditorsof the spouse who has filed. So the filing of one spouse could have significant impact on the other.


Submitted by mommontoya on Wed, 06/04/2008 - 13:16

mommontoya

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