Bankruptcy After Divorce in a Community Property State
UPDATED: June 25, 2012
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Unfortunately, if you live in a community property state, bankruptcy laws allow the debts of your former spouse to be viewed as debt that belongs to you. There are several ways that these bankruptcy laws can affect you if your spouse files for bankruptcy after your divorce.
Debt Remaining in Both Spouse's Names
If you and your spouse co-signed for debt during the marriage, bankruptcy laws in a community property state allow creditors to turn to you for that debt, even if your divorce decree says that the debt belonged to your spouse alone. You can attempt to convince the creditors that you are not responsible for the debt by showing them the divorce decree, but the fact remains that if your name has not been formally removed from the debt through a refinance or restructuring process, you may be required to pay. You could find your credit damaged if you don't.
In a community property state, all debts incurred during the marriage are generally considered to belong to the community. When a debt is incurred during a marriage, even if you weren't responsible for it, any property that was "formerly community property" can be considered an asset and used to settle the community debt. If your ex-spouse files a petition for bankruptcy, under bankruptcy law, the creditor can reach any "formerly community property" that you received in the divorce settlement to collect on a community debt.
Preventing Liability For Debt After Divorce
Unfortunately, creditors are likely to pursue you for payment after your spouse’s bankruptcy. This could shift the debt to you. If this happens to you, you will want to contact an experienced attorney as soon as you can to find out what options you may have to protect yourself from responsibility for your former spouse's debts.