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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2507
Experience:  Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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I have $20K in credit card debt, $30K in student loan debt

Customer Question

I have $20K in credit card debt, $30K in student loan debt (pre-dates my marriage), and I’m stuck in a job I abhor. I am also married and we are discussing a divorce. I’ve been told that my wife would be liable for the credit card debt even after the divorce.

I’d like to pursue a new line of work that would be more fulfilling, but much less lucrative. Up to this point, I have great credit and I’ve made payments on time for all debts for several years.

I need to know if the following scenario would practically protect my ex-wife from debt liability:

1) We divorce
2) I open new lines of credit and do a ‘balance transfer’ to transfer the $20K of credit card debt into these new lines of credit under my name
3) I then default due to my change of job

Would transferring the old debt into new lines of credit after the divorce protect her?


I believe I would be eligible for discharging my student loan debt as I could meet the requirements of the Brunner test as laid out on this website:
http://www.studentloanborrowerassistance.org/bankruptcy/

Ideally, I’d like to knock out both debts in bankruptcy without creating a liability for my ex-wife.

Is this a practical idea? If not, why? What legal issues would prevent this scenario from working? How could I make it work?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 2 years ago.

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

Washington is a community property state.

Terry L. :

Therefore, any debts incurred while married are both spouse's liability.

Terry L. :

Therefore, it may be advisable to file a joint case before divorcing, that way none of the unsecured debts will follow you, and you both can get a fresh start.

Terry L. :

If you don't, the divorce decree can put the debts right back on you, defeating the purpose of filing bankruptcy in the first place.

Customer:

Here's the situation with the divorce:

Customer:

My wife and I have agreed to get a divorce and we’ve settled on an amicable financial arrangement. We live in the state of Washington, which I’ve been told is a 50/50 state. I need to know if our financial agreement is practical.


 


We own a piece of property with two houses, two mortgages, and very little equity. One of the houses is rented out, which pays the lion’s share of the mortgages ($1500 mortgage total, $1000 in rent). We also own a boat (approximately worth $10K). I have $30K student loan debt and we have $20K credit card debt.


 


We’d like her to take possession of the houses and mortgages. We’d like me to take possession of the boat and credit card debt. I assume the student loans will follow me since they pre-date the marriage. She makes approximately $37K, and I make $65K and live frugally, so I am much better able to handle the debt.


 

Terry L. :

If you do the transfers after divorce, that would be considered recent usage and would be potentially non dischargable in the bankruptcy case if you file after

Customer:

The reason for filing for bankrupcy after the divorce is so that it doesn't jeapordize her property or her credit.

Terry L. :

Student loans are not dischargeable either way.

Customer:

ok. I think that's what I needed to know.

Terry L. :

So, you should discuss this with a bankruptcy attorney before the divorce.

Terry L. :

THat way, they can review your budgets, review your assets and available exemptions in WA to protect them.

Terry L. :

They will review the possible marital settlement agreement and community property rules.

Terry L. :

If some of the debt was joint, the creditors can still proceed against your ex after your bankruptcy too, and if the decree says you'll pay these, you'll wind up having to pay them after the bankruptcy too.

Terry L. :

So, a lot to consider.

Terry L. :

Best to meet with a bankruptcy attorney to set it all out, most offer free consultations too

Customer:

Ok. Understood. Thanks

Terry L. :

Any other questions?

Customer:

That's it. I need to get the specifics in my state

Terry L. :

any other questions?

Terry L. :

you can google washington bankruptcy exemptions

Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2507
Experience: Better Business Bur 15yrs bankruptcy experience. Chicago Bar
Terry L. and 2 other Bankruptcy Law Specialists are ready to help you

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