Q: Can a postnuptial agreement or Divorce decree free a spouse from creditors collecting on the other spouses debt?
My wife is worried that if we divorce and I eventually went bankrupt that she will be legally responsible for my finances. She thinks that there's a 5 year look back so if I went bankrupt within 5 years of our divorce finalization that creditors can legally claim her as liable.
If you file a Chapter 13 petition in the future, it includes a co-debtor automatic stay for claims "dealt with by the Plan".
Filing a bankruptcy does not create a liability in a non-filing spouse. If she is currently liable as a joint obligor, then she remains liable for that debt balance, whether you file for bankruptcy or not, but no bankruptcy court can create a non-filing spouse's liability for a debt where there is otherwise no voluntary assumption of that liability,. and no divorce court has any like power to delete a person from a credit card account direct liability. The most a divorce court can do is require one spouse to pay a debt, or hold a joint obligor harmless therefrom. But that doesn't alter the liability of the non-filing spouse to the credit card issuer, or other creditor.
Timothy Denison agrees with this answer
A: It depends on where you live. If Maryland is a community property state, then you are both equally liable on all debts incurred during the marriage, regardless of whose name is on the contract. Although a post-nuptial agreement or divorce decree can assign responsibility to one spouse or the other to pay certain obligations, it cannot relieve the other spouse from the contractual liability that arose between that spouse and the creditor. You should consult a local attorney who is experienced in both divorce and bankruptcy.
Timothy Denison agrees with this answer
In Maryland, a postnuptial agreement or a divorce decree can define financial responsibilities and liabilities between spouses, including those related to debts. If properly drafted and executed, these agreements can clarify that your wife is not responsible for your debts incurred after the divorce.
Regarding your wife's concern about a "5-year look-back" period, this is more commonly associated with bankruptcy law in the context of fraudulent transfers or obligations incurred just before filing for bankruptcy. It does not automatically make a spouse liable for the other's debts after a divorce. In bankruptcy, the court examines transactions and obligations to ensure they were not made to fraudulently avoid paying creditors.
If you file for bankruptcy after your divorce, the bankruptcy court typically only considers your individual assets and liabilities unless the debt was jointly incurred during the marriage. Your wife's liability for your debts would depend on whether she co-signed or is otherwise legally tied to those debts.
To address your wife's concerns, it might be wise to have a clearly outlined postnuptial agreement or divorce decree. Such a document should be drafted with the help of a legal professional to ensure it meets legal standards and accurately reflects both parties' intentions. This can provide clarity and protection for both of you regarding financial obligations in the event of a divorce or bankruptcy.
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