Ask Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA – Will Third Party Liability be Discharge in Someone Else’s Bankruptcy?

I get this question a lot from clients so I thought I briefly address it in this Bankruptcy Blog.

A quick answer is no if the Third Party does not have community property with the person who received a discharge in Bankruptcy.  The Bankruptcy Discharge eliminates the personal liability of the person who filed for and successfully completed Bankruptcy.  The "discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt." 11 U.S.C. § 524(e).  If your siblings, parents, or friends are guarantor, co-signer or codebtor of your loan or debt, they are still liable for the debt even though you received a bankruptcy discharge.  The exception to this rule is that community claims against Debtor's spouse is not recoverable from postpetition community property.

This is so because when one spouse files for bankruptcy, all community property of both spouses becomes the property of the bankruptcy estate even though the other spouse did not file for bankruptcy.  11 U.S.C. § 524(a)(3) protects community property acquired by either spouses postpetition (aka after bankruptcy filing) from prepetition (aka before bankruptcy filing) community creditors.  Of course there are always exceptions to the general rule or exceptions to the exceptions.  Here, the protection does not apply to debts that would be nondischargeable in filing and non-filing spouse (if filed together) bankruptcy case and the nonfiling spouse would be denied a discharge if he or she filed for bankruptcy together.  Moreover 11 U.S.C. § 524(a)(3) protection terminates when a divorce occurs.  This makes sense because once the marriage terminates, there is no more community property to protect.  For more information call Muoi Chea, experienced Sacramento Bankruptcy Attorney.

Again, I always emphasize that a website does not take the place of an experienced bankruptcy attorney because there is so much that can be discussed without drowning you with too much esoteric information.  Websites are just a small sliver of information that can only be discussed more fully in a consultation with an experienced Sacramento Bankruptcy Attorney.  Moreover, all cases are different so I cannot give a cookie-cutter answer.  If it were that simple, there would not be a need for an attorney with years of practice.  If you have any question, call Muoi Chea experienced Bankruptcy Attorney serving Sacramento, Fairfield, Stockton, CA and surrounding cities throughout Northern and Central California like Vacaville, Roseville, El Dorado, Citrus Heights, Davis, Woodland, Modesto, Vallejo, Benicia, CA.