Legal Question in Bankruptcy in Wisconsin

In marital property states such as WI, a nonfiling spouse's assets are available to the trustee in bankruptcy for seizure and sale to satisfy the debts of the marital community. Unlike filing spouses, nonfiling spouses cannot claim exemptions to protect their assets, sometimes creating severe consequences for them in terms of losing major assets such as pensions, real estate, and financial accounts (to name only a few), to the filing spouse's trustee in bankruptcy. In return, however, courts sometimes recognize the concept of "hypothetical discharge" (sometimes referred to as a phantom discharge) of debts for nonfiling spouses, offering a limited level of future protection for the nonfiling spouse after they have endured this trauma. There is no written document specifically proving such a hypothetical discharge; rather it must be raised in defense of collection lawsuits by the attorney who is defending you in a timely fashion and argued at that time to the judge hearing the collection lawsuit. Like all affirmative defenses, it must be timely asserted or be deemed waived. One down side of such a discharge, however, is that it uses up one of the nonfiling spouse's opportunities to get a new discharge of debt in chapter 7 before eight years have passed. In your situation, I would therefore guess that you are probably not eligible for another new discharge in your new spouse's future bankruptcy(s) until eight years have passed. However, you need to raise this issue as soon as possible with your spouse�s bankruptcy attorney, since there may be arguments either way. Another solution might be for you and your new spouse to enter into a prenuptial agreement (more specifically a marital property reclassification agreement), exempting you from these requirements in the future. One of these may also be worth considering in order to avoid jeopardizing the bankruptcy discharge of you new spouse due to your previous bankruptcy. My comments here are intended for public education only and do not make me your attorney, but you are nonetheless welcome to contact me for further clarifications at my Racine, WI office at 262-633-3090, or email me at [email protected]. See me on the web at www.jayknixonlaw.com. Also, feel free to view over fifteen years of my past answers arranged by topic at http://www.lawguru.com/answers/search/attorney/jknixon. Web forum answers may contain attorney advertising materials.