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Property of Debtor's Wife Untouchable During Bankruptcy

Posted By admin || 2-Apr-2009

There was an interesting case in the bankruptcy case of Duncan, John C.; In the Matter of (Cadle Co. v. Duncan), (5th Cir. 2009) where a debtor was allowed a Chapter 7 Bankruptcy discharge despite a creditor's assertion that the debtor failed to disclose assets.

The details of the case:

A debtor who had $420,102 judgment against him failed to disclose assets during bankruptcy. When challenged by the creditor and bankruptcy trustee, the debtor testified that the assets belonged to his wife who inherited a substantial amount of cash and property before and during their marriage.

The bankruptcy court agreed with the debtor ruling that the debtor did not make any false statements regarding ownership of the assets and said that there was no fraudulent intent. But what the bankruptcy court did not take into consideration was the presumption under Texas law that property acquired during marriage is community property. Which technically could make it vulnerable during a bankruptcy proceeding.

If you're considering bankruptcy and are a married debtor whose non-debtor spouse has substantial property contact a bankruptcy attorney to find out how the bankruptcy proceeding could possibly affect your spouse's assets.

Categories: Bankruptcy
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