I’m not a lawyer, I’m a judgment and debt referral knowledgeable (Judgment and Assortment Company Dealer). This text is my opinion, based mostly on my expertise in California, and legal guidelines fluctuate in every state. For those who ever want authorized recommendation or a method to make use of, please contact a lawyer.
What if one has have a judgment debtor, and their non-debtor partner filed for Chapter 7 no-asset Federal chapter courtroom safety? What if solely the non-debtor partner filed for chapter, and the debtor-spouse didn’t?
How can one get better a judgment in opposition to the judgment debtor partner, when their non-debtor partner filed for chapter safety, or has already discharged their money owed in chapter? How does this have an effect on one making an attempt to get better a judgment from the non-bankrupt debtor partner in a group property state?
After the non-debtor partner has began a chapter, or has already discharged their money owed; actions to fulfill the debtor partner’s debt with group property is stayed (forbidden and unlawful).
The debtor partner’s sole and separate property is normally topic to levies to fulfill a judgment. Nonetheless, one have to be further cautious to not violate a chapter courtroom’s order, and do their homework. With a small judgment, or when the debtor is and can stay poor, it may be greatest to cease studying right here, and write off the judgment.
Chapter keep violations can lead to dire penalties, so one have to be cautious to have sheriffs or marshals levy solely non-stayed and/or non-dischargeable property. To be further protected, one ought to make double-sure which property are literally and legally out there first. Probably the greatest methods to look earlier than you leap, is with a debtor examination (usually with a doc manufacturing request). That is achieved by scheduling and serving an OEX (Order to seem for EXamination) on the judgment debtor.
When chapter is concerned, it’s a superb concept to first get permission from the chapter courtroom, earlier than making an attempt any enforcement or discovery actions in opposition to a debtor.
To assist strategize what your first or subsequent restoration technique needs to be, you would begin by asking the chapter courtroom for go away (permission from) their BK courtroom, to allow you to get a state courtroom issued OEX (Order to seem for EXamination), served on the judgment debtor, with the included (at the very least in California) OEX lien in opposition to solely the debtor partner’s sole and separate property.
In lots of states, serving an OEX on a judgment debtor creates a lien in opposition to their private property. In California, serving an OEX on a judgment debtor partner creates a 1-year silent lien in opposition to the non-public (though not real-estate based mostly) and group property shared by the opposite partner, if it’s not stayed by a chapter safety.
The debtor and their partner have a 100% indivisible curiosity in the neighborhood property of the marital property, so long as they’re married to every one other. In a group property state, when one partner’s money owed change into discharged by a chapter, the group property that was acquired pre-petition (and normally pre-discharge), is resistant to levy due to the “phantom discharge” created by present legal guidelines. (I’m not a lawyer.)
The phrase “phantom” within the phrase “phantom discharge” signifies that in a group property state, there will be an additional chapter safety when one partner information for chapter safety, that will shield the property of the opposite debtor partner. Often, “phantom discharges” happen solely in group property states (presently Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and possibly Wisconsin).
A phantom discharge happens when private and actual estate-based group property turns into immune from judgment enforcement in opposition to a judgment debtor partner, as a result of the non-debtor bankrupt partner owns a 100% and indivisible curiosity in the neighborhood property property, and that partner’s indebtedness has been discharged.
A phantom discharge is an unearned defend in opposition to collectors for the group property property of each spouses in a married couple, even when just one partner discharges their money owed in chapter. (See BK codes 11 US 541 and 11 US 524).
So long as the couple stays married, the phantom discharge stays, which is commonly an awesome injustice for judgment collectors of the (non-bankrupt) debtor partner.
If the married couple qualifying for a phantom discharge will get divorced, one might petition the household courtroom to enjoin the dissolution proceedings, and levy the nonexempt portion of the debtor partner’s half of their marital property, if any.
Solely individuals or entities can get chapter discharges. Property shouldn’t be an entity, so it can’t get a discharge. Typically a judgment debtor doesn’t win in chapter courtroom, and one or all, of their money owed are declared non-dischargeable.
In most group property states; and in California, household code part 910 (a), specifies that the actual and private property of the group property can be utilized to fulfill the money owed of both partner incurred throughout or earlier than marriage. Because of this actual or private property of the group property can be utilized to pay a non-dischargeable debt. That is the other of a phantom discharge, so collectors get a large open path to all the group property of the judgment debtor.