18 Mar My Husband Or Wife Is Filing A Bankruptcy… How Will It Affect My Personal Property
If it is clear what personal property is yours and what belongs to your spouse, then when your spouse files a bankruptcy there should be little or no detrimental effect on your personal property. Of course, to the extent your spouse’s personal property is not protected by a bankruptcy exemption, a Chapter 7 trustee can take it, sell it and use the proceeds to pay your spouse’s unsecured creditors.
The problems begin when the ownership of personal property in your household is less than clear. In some families, all of the vehicles are titled to the husband, even though one is used exclusively by the wife. Who owns the wife’s vehicle? She may consider it hers, but by law, if it is titled to the husband, it is owned by the husband, and to the extent it is not protected by an exemption, can be taken by the trustee.
What about untitled property?If your household includes a boat, four-wheelers, or snowmobiles…who owns them, you or your husband? Don’t be surprised if the Chapter 7 trustee wants to take these items of personal property.
Yet another problem arises if your husband, who is now filing a bankruptcy, has given you a gift in the year before he files bankruptcy. Let’s say that a few months before filing his bankruptcy, on Valentine’s Day, your husband bought you an expensive piece of jewelry. Is that jewelry recoverable by his Chapter 13 trustee? The bad news is that it IS recoverable by the trustee. His gift to you can be deemed to be a “fraudulent transaction”, much the same as it would if he had signed over all of his property to you right before he filed his bankruptcy petition.
Once again, if your husband files a Chapter 13 instead of a Chapter 7, none of the property that could be taken by a Chapter 7 trustee would be taken at all, as long as your husband’s unsecured creditors get at least as much as they would have received in the Chapter 7.
Next: How your spouse’s bankruptcy will affect your tax return.
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