I agree with everything Adam told you. And, since I had a similar issue come up recently, I thought I would give you one more piece of information that may be helpful to you that maybe no one else has considered yet since it is a somewhat rarely used option...
In Chapter 13, 11 U.S.C. 1301 (which you can view by clicking here
) provides a "co-debtor stay," which means creditors cannot pursue someone who is jointly liable on a debt with the debtor in bankruptcy, even if that jointly-liable person did not also file bankruptcy, as long as the debtor pays the claim in full in the Chapter 13 bankruptcy case.
Now, depending on the amounts owed on the joint cards, this may not be feasible for you, but it may be worth going to your attorney and asking if you can amend your Chapter 13 Plan to pay the joint debts in full through the Plan. If you do this, then the co-debtor stay in 11 U.S.C. 1301 will likely protect your wife and you can get the lawsuits/collections off her back.
For example, say she is jointly liable on $10,000 worth of credit cards. Plus interest over 20 months, paying those cards may actually require $13,000 to be paid. So, if you have say, 21 months left in your Chapter 13 Plan, then if you increase your monthly payments by around $619, then you could pay them in full and the co-debtor stay would protect them from coming after her. I used 21 months in the hypothetical example since you may be able to modify your Plan to go another 21 months or so since the Plan can be extended all the way to 60 months, and if you filed in October 2005, then you could potentially go to October 2010, which is about 21 months away if my math is right.
Also, if you are already paying a large amount to unsecured creditors through your Plan, then the increase may not have to be 100% of the joint debt amount. For example, if your Chapter 13 Plan is already paying unsecured creditors (which includes credit cards, even the joint ones), say, 30% of their claims, then when applying that to my example above, that means the joint credit cards are already getting $3,000 of the $10,000 they are owed, so your Plan payments may only have to increase by around $453 for the remaining 21 months to pay them in full and protect your wife.
Of course this will vary depending on the joint amount of credit card debt
, what percentage of unsecured debt your Plan is already paying, and how many months you have left in your Plan, but you get the idea. I'm not saying the increase in your Plan payment is necessarily feasible to pay, but I wanted you to know it is an option in case the amounts are something you can work with.
Furthermore, if the credit card company sued her without first obtaining relief from the co-debtor stay in Bankruptcy Court
, then they may be illegally pursuing her. Credit card companies have to first request relief from the co-debtor stay in Bankruptcy Court before they can pursue collections, so you may want to confirm with your attorney that they did that first, or you may be able to get their collection attempts stopped, at least temporarily. I say temporarily because if they didn't, then they will once you raise the issue, but it would at least potentially buy you some time to modify the plan and get them off her back!
One potential glitch with this plan is that the Bankruptcy Code
says you have to treat all general unsecured creditors the same in your Plan. So, some trustees
object if the debtor says they want to pay some credit cards in full (to protect a co-debtor) while only paying a small percentage to others. But, some courts allow debtors to do this because they believe the justification of protecting a co-debtor is sufficient to permit treating creditors differently. I don't know what your jurisdiction's take on this is.
Now, while this may work for credit cards if the amounts are smallish, it is not likely feasible for you to do it with the mortgages which I assume you surrendered and are discharging since you are now renting. So, if your wife is also liable on the mortgages
, then like Adam said, this may be a big problem since they can still probably come after her even if you discharge it in your Chapter 13 unless your attorney made some other arrangements, so you should clear this up with your attorney. It might be the case that your wife will need to file her own Chapter 7
or something if all this debt is going to fall back on her. Like Adam pointed out, she may be judgment proof since she does not have income to garnish, but lawsuits against her may attach to your real estate as judgment liens, so she may need to do something if all these issues are not straightened out during your Chapter 13.
What seems like a bad idea is to modify your Plan and increase payments to get the credit cards off her back, then she winds up filing Chapter 7 anyway because the mortgage lenders are after her, thus making your increase in payments a waste since she dicharged the debts anyway.Maybe
it is the case in Michigan that mortgage lenders cannot pursue a deficiency balance after a home is sold in foreclosure and so this is a non-issue, but I would clear that up with your attorney. But, I think mortgage lenders are
allowed to pursue deficiency balances in Michigan according to here
I suggest setting up a face-to-face appointment with your lawyer to go over these issues so you can sleep at night!
My two cents.LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.