Discharge of Spouse Protects Community Property
By Cathy Moran, California bankruptcy lawyer on May 11, 2007 in Bankruptcy Cases of Interest, California, Discharge, What Can and Cannot Be Forgiven, General Bankruptcy Information, Marriage and Debt
The usual rule in bankruptcy is that an individual’s discharge only relieves the debtor of liability for a debt. Anyone else liable on the debt with the debtor remains liable.
As a recent decision in California illustrates, in a community property state, a community creditor cannot reach the post bankruptcy wages of either spouse, as those wages are protected by the one spouse’s discharge.
The policy here is that the bankruptcy of one spouse in a community property state bring all of the marital property of the couple into the bankruptcy case of the spouse to file. Creditors who have a claim against the community, even as a result of the contract of the non filing spouse, can participate in a distribution by the bankruptcy estate.
Upon discharge of one spouse, the discharge of Section 524 protects any property that the debtor owns, including any community property acquired by the couple after bankruptcy.
The protection of the community property discharge lasts only as long as the marriage does. Death or divorce will again expose the non filing spouse to collection action on the debt discharged as to the other spouse.
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