I interviewed a married couple wanted to file joint Chapter 7 bankruptcy. Each spouse had separate credit cards and no joint unsecured debt. They have assets owed jointly free and clear of debt. My first thought was that their joint assets would not be protected in a joint bankruptcy. Joint marital assets owned as tenants by entireties are protected from the debts of either spouse provided the spouses do not have joint unsecured debts.
Then, I considered the point that a joint bankruptcy does not mean joint debt. My understanding, from reading some cases in the past, is that a joint bankruptcy estate is actually the joint administration of each spouse’s separate bankruptcy estate. If so, then debtor’s with separate debts filing a joint petition should be able to exempt their tenants by entireties property. I don’t recall ever filing a joint case with separate debt, but I think the analysis may work.
In any event, it will not be tested by these clients because at the end of our meeting they decided that just one spouse will file Chapter 7 bankruptcy. The filing spouse will exempt their entireties property.
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