Legal Question in Bankruptcy in Wisconsin

WI- husband declaring ch. 7 should I?

My husband and I have been married since March 2008. About a week after we married, he signed a Promissory Note to purchase a restaurant business for about $250k. The business has now failed. The owner is going to sue him for the whole amount of the promissory note, if not more.

My husband is going to declare ch. 7 bankruptcy to get protection from this suit, and also because he has about $18k of personal debt that he incurred BEFORE WE WERE MARRIED. He currently has bad credit, so ch. 7 bankruptcy is pretty much the best option for him. I however have pretty good credit (in the 700s). I have about $7,500. All of these have always been paid on time and we have no problems paying them. My name is the only name on all of the accounts.

The question is whether I need to file bankruptcy or not. My husband already has a bankruptcy lawyer and is in the process of filing, which will cost us $2,100. We were originally thinking I would not declare bankruptcy because my debit is not a problem, and we do not have any joint accounts (except a checking and savings account). However, the lawyer advised my husband that I too should declare bankruptcy to protect me from a judgement for $250k against me. Could this happen? Should I file?


Asked on 7/15/09, 2:51 pm

1 Answer from Attorneys
Jeffrey Murrell Law Office of Jeffrey L. Murrell

Re: WI- husband declaring ch. 7 should I?

I would strongly suggest that you hold off filing with your husband at this time. In theory, his filing and subsequent receipt of a discharge of the debts will provide what we call a "phantom discharge" for you. Because of Wisconsin's wacky marital-property laws that make 100% of your property 100% of his property, any attempt to garnish your wages and to collect from you on any judgment that he incurred, but gets discharged, would legally amount to garnishing/collecting from him (which is against federal law, once a discharge is issued). That said, I am among the group of bankruptcy practitioners who do not absolutely agree that such a thing as a "phantom discharge" will potentially protect 100% of non-filing spouses out there from 100% of filing spouses' discharged-debt creditors. But what's important to note here (at least for you) is that your husband being granted a discharge might be all it takes to keep that particular creditor off your back, too. If he should at any time after your husband's discharge try to garnish your wages or collect from you, there are legal channels in the bankruptcy court that you can approach to try to lose him once and for all. Should you fail to be able to get protection or relief from the bankruptcy court, then would be the time for you to consider filing bankruptcy yourself. Also, if you ever decide to file bankruptcy at a later point in time, be sure to list this $250k, even if the guy never bothers you. Good luck!

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Answered on 7/18/09, 4:37 pm


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