Community Property and the Married Debtor
By Cathy Moran, California bankruptcy lawyer on Feb 4, 2007 in General Bankruptcy Information, Marriage and Debt
The beginning point in a bankruptcy proceeding is determining what property the debtor owns. When a married debtor in a community property state files bankruptcy without his spouse, all of the community property becomes part of the bankruptcy estate. That includes the share of the community that would otherwise belong to the non filing spouse.
All creditors who have claims that could be satisfied from community property under state law get to file claims in the case of the filing spouse.
Since all of the community property became part of the bankruptcy estate, upon the discharge of the filing spouse, all of the community property later acquired by the couple is free from the claims of the community creditors included in the bankruptcy. This is laid out in Section 524(a)(1)(3) of the Bankruptcy Code.
The discharge of the marital community provides substantial protection from creditors to the non filing spouse: the non filing spouse’s creditors can only satisfy their prepetition claims from the separate property of the non filing spouse.
This protection from creditors accorded the non filing spouse isn’t as comprehensive protection as the filing spouse gets, but it is powerful nonetheless.
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