Will my filing Chapter 7 personal bankruptcy effect my spouse's or my own I.R.A. accounts, cash value life insurance accounts, or jointly owned land?

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Will my filing Chapter 7 personal bankruptcy effect my spouse's or my own I.R.A. accounts, cash value life insurance accounts, or jointly owned land?

Post  Admin on Mon Sep 21, 2009 3:55 pm

In general, your filing bankruptcy will not effect your spouse's property. In Chapter 7, the Trustee will be able to take property which you own if it is not exempt. The Trustee cannot take property of your spouse even if it is not exempt.

Unfortunately, the answer is not so easy if you own propety with someone else, including your spouse. Whether the property may take only your interest in the property, or all of the peroperty depends on the nature of your ownership in it.

Jointly owned property. If you own property jointly with anyone, including your spouse, the Trustee may take your share of the property. The Trustee cannot take the joint owner's share. However, dividing the property between the joint owner and the Trustee may require that the property be sold.

Community property. Community property is property which is acquired through the earnings of you or your spouse during marriage. It can be taken by the Trustee and used to pay debts for which the community is liable. Whether the community is liable depends upon state law.

The most common property owned jointly or as community property is a home. Since Arizona has a relatively generous homestead exemption of $150,000 , we do not often have to deal with the problem of the Trustee seeking to take a home.

You should be able to keep your SEP-IRA & 401K plans. In Arizona, IRAs are exempt--except for deposits made within 6 months before filing--and ERISA plans (which 401k and other retirement plans would ordinarily be) are also protected--if the documents that created them contain properly drafted spendthrift protection.

In Arizona, the cash value in your life insurance is exempt up to $20,000, if you name the proper beneficiaries and meet the other requirements to claim the exemption.

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