Do I receive any protection from my spouse’s bankruptcy?
One of the reasons for filing bankruptcy is the protection of the automatic stay, which goes into effect as soon as a case is filed and generally protects the debtor, the debtor’s property, and property of the estate from actions by creditors. In a chapter 7 case, a husband or wife would not receive any personal protection from his or her spouse’s bankruptcy filing. In fact, the automatic stay and the discharge in bankruptcy are personal to the debtor and an unsecured creditor could proceed against the non-filing spouse for the full amount of a joint debt. However, a husband or wife might receive some benefit from the automatic stay with respect to actions by a secured creditor against jointly owned property. For example, if you and your husband or wife were facing a foreclosure auction on your former marital residence, a filing by either spouse may stop the sale.
Chapter 13 is different and includes a codebtor stay that extends the protection of the automatic stay to the nonfiling spouse for consumer debts. The codebtor stay would extend to a spouse, a former spouse, or any person who is liable with the debtor on a consumer debt. The codebtor stay in Chapter 13 was primarily intended to benefit the husband or wife filing bankruptcy by preventing creditors from obtaining a benefit by pressuring codebtors close to the debtor, such as spouses, friends, relatives and fellow employees.
The codebtor stay offers little or no benefit to the nonfiling spouse if the spouse filing bankruptcy does not oppose, or cannot successfully defend, a creditor’s motion for relief from the automatic stay. Sometimes creditors have sought relief from the automatic stay in a chapter 13 bankruptcy case in Virginia, but have neglected to seek relief from the co-debtor. Typically, although actions taken in violation of the automatic stay are void, the court will grant relief from the co-debtor stay, finding that the purpose of the codebtor stay is no longer served once the creditor obtains relief from the automatic stay as to the debtor. See, e.g., In re Morris, 365 B.R. 613 (E.D. Va., 2007).
You should discuss with your bankruptcy or divorce lawyer how the bankruptcy of your spouse or former spouse affects you.