In Texas, the Non Filing Spouse may enjoy the protection of the filing spouse’s bankruptcy discharge
What happens when a married couple decide that only one spouse will file bankruptcy and the other will be a Non Filing Spouse ?
ANSWER: All community property of the family is protected from ALL pre-petition creditors, even the separate creditors of the non filing spouse
This is sometimes referred to as the “Community Discharge.” In exchange for exposing all community property to administration by the trustee in the bankruptcy, all of the community debts are discharged, even if they are not the separate liability of the filing spouse. The non filing spouse can benefit from the filing spouse’s discharge because when a case is filed by one member of the marriage, the entire marital community gets a discharge and creditors cannot pursue the non-discharged spouse’s interest in community property. For this reason, it makes sense for a married couple to consider having only one spouse file bankruptcy and have the other spouse be a non filing spouse.
After one spouse has filed bankruptcy, a creditor with a claim against the non filing spouse can only collect it’s debt from the separate property of the non-filing spouse.
The decision about whether a couple should file bankruptcy jointly or separately with a non filing spouse involves an analysis of what types of property the family owns, what types of debt they have, and which types of property are exempt in bankruptcy. ”Separate property” includes the following: (1) assets acquired before marriage; (2) assets acquired by gift during marriage; or (3) assets acquired by inheritance. ”Community debt” includes any debt incurred for the purpose of furthering a community purpose or a community business, even if the debt or credit card is in only one spouse’s name.
While all of the above may seem complicated, this can be broken-down as follows: After one spouse files, all community debt is discharged, and the only remaining property that any pre-petition creditor can attempt to collect or levy against is the separate property of the non filing spouse
