You may have personal financial issues that you brought into a marriage, or that really have little or nothing to do with your spouse. You can file a petition in bankruptcy without including your spouse, but how the two of you will be treated will depend in part on where you live and what property or debt you have together.
Selling Jointly owned property
In New Jersey, Pennsylvania and most states outside the western United States, Florida and Louisiana “community property” between a husband and wife does not apply. This means that unless a divorce has already been filed when the bankruptcy is filed, any property that titled exclusively to you, as well as your rights and interest in jointly owned property becomes part of your bankruptcy estate.
A bankruptcy will generally not remove the claims or interest of your spouse in jointly owned property. However, if the property has enough equity or value that your interest in it cannot fully be protected by exemptions available to you in bankruptcy, it can be subject to sale.
In New Jersey, even property that is held as “tenants by the entireties” (ie as husband and wife) can be sold by a bankruptcy trustee over the spouse’s objection. If that were to occur, the non-debtor spouse has certain rights and protections. First, the trustee has to show the court that the benefit to creditors from a sale outweighs the harm to the non-debtor spouse. If the value is high enough, this will commonly be the case. Secondly, the spouse is entitled to his/her share of the net proceeds after paying costs of sale and any mortgage or valid secured debt. Third, the spouse can outbid the proposed purchaser to buy out the debtor’s interest in the property.
This is a situation that absolutely requires careful consideration and advice from an experienced, knowledgeable bankruptcy attorney.
No Discharge of Joint Debt
If you do file for protection under Chapter 7 without your spouse, any discharge of joint debts will only affect your obligation. Even though your debt is discharged, your spouse will still be required to repay his or her portion.
The flip side of this is that your household income will still have to be used to pay your non-filing spouse’s debts and joint debt. If there is not enough money to do this, a joint bankruptcy filing may be needed.
These are situations that need careful and detailed review by an experienced bankruptcy attorney knowledgeable about both bankruptcy and divorce issues, as well as the process of trustee sales of assets. At Neuner and Ventura LLP, we have that background.
Contact Neuner & Ventura, LLP
To schedule an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request. There is no cost or obligation for your first meeting.
Representing Clients across South Jersey