Answers from AARP

These matters are addressed below:

Can I file for individual bankruptcy without having to add my spouse to the petition?

What assets are in the bankruptcy estate when only one spouse files for bankruptcy?

What can I exempt from the bankruptcy estate?

What is an "automatic stay" in bankruptcy?

Is it possible to get relief from the automatic stay?

Can I file for individual bankruptcy without having to add my spouse to the petition?

Any "person" can file for bankruptcy as a "debtor." This would mean that one spouse could file for individual bankruptcy, and his or her spouse need not join in the action (11 U.S.C. 109(a)). In most cases, an individual spouse could file under Chapter 7 or 11. He or she may also be able to file under Chapter 13 if he or she has a "regular income" and owes, on the date of filing, non-contingent, liquidated, unsecured debts of less than $250,000 and non-contingent, liquidated, secured debts of less than $750,000 ( 109(e)). A husband and wife could file jointly under Chapter 13 if, together, they meet the above limitations.

The code provides for specific treatment to be taken when a "joint" case is filed. A "joint" case is defined as a filing of a single petition under any Chapter by an individual that may be a debtor under such Chapter and such individual's spouse (11 U.S.C. 302). In such a case, the court shall determine the extent, if any, to which the debtors' estate shall be consolidated. The legislative history accompanying 302 makes it clear that one spouse cannot take the other into bankruptcy without the other spouse's knowledge and consent.

What assets are in the bankruptcy estate when only one spouse files for bankruptcy?

The formation of the bankruptcy estate is governed by 541 of the Bankruptcy Code (11 U.S.C. 541). Basically, the bankruptcy estate includes all debtor's legal or equitable interests in property at the time of commencing the action. Thus, entireties property is "part of the estate." However, the debtor is then allowed to exempt such property to the extent that such an interest as a tenant by entireties is exempt from process under applicable state non-bankruptcy law. However, it would appear that this exception is only available if the debtor chooses the state exemptions. ( 541(a)(1) and (a)(2), 522(d)(1), and 522(b))

The estate is formed at the time of filing, and only the property owned by the debtor at that time can become part of the estate. Generally, property acquired after filing the petition remains the debtor's. However, there are important exemptions to this rule. After acquired property can be made part of the bankruptcy estate if the debtor acquires or becomes entitled to acquire the property within 180 days of filing:

bullet by bequest, devise, or inheritance;
bullet as a result of a property settlement agreement with debtor's spouse, or of an interlocutory or final divorce decree; or
bullet as beneficiary of a life insurance policy or of a death benefit plan.

Also, specifically excluded by the Bankruptcy Code is any interest the debtor has in a "spend-thrift trust" that is enforceable under non-bankruptcy law.

What can I exempt from the bankruptcy estate?

Tennessee has opted out of the federal exemptions found at Bankruptcy Code 522(d). Tennessee residents may only use the state exemptions. These are just a few of the exemptions that may be claimed:

bullet up to $7,500 in equity in the homestead for joint owners; $5,000 for single persons;
bullet necessary clothing, bible, school books and family pictures of debtor and the debtor's dependents;
bullet up to $4,000 worth of personal property;
bullet up to $1,200 in value of a motor vehicle; and
bullet the debtor's right to receive:
bullet a social security benefit, unemployment compensation, or public assistance benefits;
bullet a veteran's benefit;
bullet a disability, illness, or unemployment benefit; and
bullet alimony, support, or separate maintenance, to the extent reasonably necessary to support the debtor and the debtor's dependents.

The debtor can also exclude property that is exempt under federal law, other than subsection (d) of 522. Some of the other items that may be exempted under other federal laws include:

bullet Foreign service retirement and disability payments (22 U.S.C. 4060);
bullet Social Security payments (42 U.S.C. 407);
bullet Injury of fisherman, seaman, and apprentices (46 U.S.C. 11109);
bullet Civil service retirement benefits (5 U.S.C. 8346);
bullet Longshoremen's and Harbor Worker's Compensation Act death and disability benefits (33 U.S.C. 916);
bullet Railroad Retirement Act annuities and pensions (45 U.S.C. 231m); and
bullet Veterans benefits (38 U.S.C. 5301).

What is an "automatic stay" in bankruptcy?

Section 362 of the Bankruptcy Code (11 U.S.C. 362) stops virtually all debt collection efforts during the automatic stay period including:

bullet use of dunning letters or other informal collection methods
bullet obtaining, perfecting or enforcing a lien
bullet post-petition setoffs
bullet commencing or continuing a collection action
bullet enforcing a pre-petition judgment against "property of the estate" or the debtor
bullet commencing or continuing, including the issuance or employment of process, of a judicial, administrative or other proceeding against the debtor
bullet any act to obtain possession of property of the estate or of property from the estate.

The enumerated exceptions to the automatic stay are limited. Of interest are those exceptions that provide that the stay cannot prevent the commencement or continuation of a criminal action, nor the collection of alimony, maintenance or support from property that is not property of the estate ( 362(b)(1) and (b)(2)).

The effect of the stay is obvious. It gives the debtor a breathing spell from his creditors. The stay may also prevent actions against a co-debtor if the petition for relief is filed under Chapter 13. In a Chapter 13 proceeding, a creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt from any individual that is liable on such debt with the debtor, unless the co-debtor becomes liable on such debt in the ordinary course of his or her business ( 1301).

The stay is not permanent, but is intended to give the trustee in bankruptcy an opportunity to inventory the debtor's position before proceeding with the administration of the case.

Is it possible to get relief from the automatic stay?

If the action desired to be taken does not fit under one of the eight exceptions to the stay, then the party desiring to take the action must request relief from the Bankruptcy Court. This would appear to include landlords, as eviction would affect possession of property of the debtor, even though he or she has only an equitable interest in the property.

A requesting party is entitled to relief under two circumstances. The first is "for cause." This includes, but is not limited to, lack of adequate protection ( 362(d)). It appears that "other causes" would include the lack of any connection with or interference with the pending bankruptcy case. Examples of actions that should be granted relief include divorce or child custody proceedings, and a probate proceeding in which the debtor is the executor or administrator of another's estate.

The second method is if the requesting party, with respect to an action against property, can show that the debtor does not have an equity interest in such property, and such property is not necessary to an effective reorganization. This method would appear to be the method available to landlords in eviction actions. However, the Court need not grant relief if it determines that the requesting party is adequately protected. The Bankruptcy Code now places a burden on the Court to act in a timely manner on requests for relief from the stay. The stay is automatically terminated thirty days after the request is made, unless the Court orders that it be continued within this time period ( 362(e)).

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