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Individuals who may be affected by bankruptcy

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by , 10-08-2011 at 05:42 PM (1561 Views)
Someone who owes me money filed for bankruptcy. How do I know if I can still collect my debt?
If you are a creditor who is owed money by a debtor who recently filed for bankruptcy, then the first thing that will happen is you will receive notice of the bankruptcy proceeding and notice of your ability to file a claim for the amount of debt owed to you. In most Chapter 7 bankruptcy proceedings, there are no assets available to sell off and pay creditors, so you may not be paid back your debt and you may have no ability to seek payment of the debt unless the debt is nondischargeable (see discharge for debts that may not be discharged)

Who's Paid First: creditor or codebtor? Subrogation of Bankruptcy Claims
A codebtor may take on debt with a debtor who files for bankruptcy. If the codebtor owes only P of the property but pays off all the debt because the debtor could not pay, the codebtor has a right to subrogation that places them in the shoes of the creditor and gives them a priority claim over the debt owed to them by the debtor. However, until the creditor is paid off in full, the codebtor's claim is subordinate to the creditor's claim and will not be paid until the creditor is paid off first.

What is a joint petition and how is spouse affected by bankruptcy?
A married couple can file a joint petition for bankruptcy. Filing a joint petition eliminates each individual spouse's debts, along with all other debts that the spouses hold jointly (e.g. joint tenancy, tenancy by the entirety, community property). If one spouse files, the other's property may or may not be affected depending on state laws.

What happens if one spouse files for bankruptcy and not the other
Most states are common law states and spousal property is generally held in tenancy by the entirety (house only) or joint tenancy. In a common law state, a non-bankrupt spouse holds an interest in the property they own jointly with their spouse and creditor's may not typically reach this interest. Thus, the bankrupt spouse will lose their 1/2 interest in the property while the non-bankrupt spouse keeps their 1/2 interest and all their separately owned property.

Some state (California and Texas for example) are community property states. All marital assets is considered community property which each spouse owns equally as a whole. A creditor can reach all interest in the property, regardless of whether bankruptcy is filed separatly or jointly. The only property belonging to the non-bankrupt spouse that is generally unavailable to creditors is property held prior to marriage.

How does a spouse declaring bankruptcy affect child support?
Child support is nondischargeable under bankruptcy so child support will not be affected by filing for bankruptcy.

I Am A Co-Signer On A Loan That Was Discharged Can The Creditor Come After Me Now?
Yes, a bankruptcy discharge only releases the debtor from liability, the creditor may still go after the co-signor who took on liability in the even the debtor would not pay
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Bankruptcy Law