If My Spouse Files Bankruptcy, Will I Lose My Assets?

Your parents are divorcing and then your dad says two words that change everything. I'm filing bankruptcy. Now suddenly your mom is panicking and looking to you for answers that you just don't have.Well, today we're going to change that. Let's get into it on today's. Hello and welcome to Financially Confident Christian.This is the show where every day we're trying to help you break that shame cycle and help you do better with your finances. And today we're talking about something that hits different when it's your family. It's a real practical question.This person asked what happens to one spouse's assets when the other files bankruptcy, especially when divorce is already in motion. And today's question is a question mixes law and finances. So today I want to help you separate confusion from from facts.And if you're facing this or maybe you're helping a family member through it, this is for you. And if you've got a question for this show, I would love to hear it. You can go to financiallyconfidentchristian.com/questionWe'll put a link in the show notes. But again, that's financiallyconfidentchristian.com/question Let's get right to today's listener question. Listener writes this hi, Ralph.My parents are getting divorced and it should be finalized in July or August. I live with my mom. Today my dad texted me saying something.He's going to file for bankruptcy soon because he owes a lot of money on his credit cards and he's worried that if he doesn't file before the divorce is finalized, my mom's stocks will get locked by the credit company. Now my mom has her own stocks and her own credit cards. We don't think there's anything that they share.We've been trying to convince my dad to wait until after the divorce is finalized, but we're not sure it will even matter. My mom is really stressed now, Ralph. She's worried that this bankruptcy will destroy her assets.Can you help us understand what's actually going to happen? Thank you so much. Alright. Well, first of all, I want to say something to you. You've really got two situations going here. A good news, bad news thing.The good news in my view is your mom's separate assets are mostly protected. The bad news about this situation is timing matters. And if you hear nothing else, I say your mom needs a lawyer to protect what matters.I'm an accountant. I'm not an attorney. Today what I'm going to talk about is general financial context, not Legal advice? I do not give legal advice.So the one point today is getting your mom to a lawyer in her state to help her understand what's going on. But I want to give you some basic guidelines here. Let's talk about what bankruptcy does and doesn't do.Bankruptcy in general discharges the filer, the person who files own debts. It doesn't automatically touch the other spouse's assets. So if the asset is in her name only, it's not automatically at risk.Now you noticed I said if and not automatically. So her stocks, her credit cards are her responsibility, not his. But the real risk isn't what's in her name, it's what's joint or cosigned.Now I'm going to take a little tangent here. If your mom happens to live in what's called a community property estate, some of this debt may count as community debt.Even if cards are in his name and anything they co sign together, she's on the hook.Regardless of whose name is, where it's at, if there's joint accounts or joint assets, those things can all be effective now truth is, the divorce might address these things only if the lawyer did it right. So in general, bankruptcy affects the person who files, not automatically, everyone around them.The real risk isn't what's in her name, it's what's joint or what she's co signed. That's the first part, but let's get to the second part. And that's the timing problem you mentioned.You got this text from your dad that said I'm filing bankruptcy. Hey, sounds like he's got a lot of credit card debt. I get it.But if he files before the divorce is final, the bankruptcy court may have questions about marital versus separate property. If the divorce is final first, then the bankruptcy is cleaner because everything's already been divided. But honestly, it depends on your state.It depends on your parents specific situation. And it also depends on what the bankruptcy court decides once he files a divorce. Timeline isn't really in their control anymore.So as I said, timing matters. But only a lawyer in your state can tell you what exactly that means. So here's what your mom needs to do right now.I'm talking about when you get done listening to this, pick up the phone, go talk to your mom, talk to her and tell her to find an attorney, make a payment today. The attorney needs to know these things. The attorney needs to know that her ex is planning bankruptcy.The attorney needs to explain to her what that means for the settlement. If she's got no Attorney. And the divorce is almost final. She needs to get one right now. This isn't a text to dad or some hopeful conversation.Your mom needs a lawyer in the room before anything else happens. So here's what you can do this week. You got to stop trying to convince your dad to wait. First of all, it's not your job.He's put you in a terrible situation. And no matter what you do, it's probably not going to work out. You've got to focus your energy in getting your mom some legal advice immediately.If she doesn't have a lawyer, find one. You can call the state bar association, there's legal aid organizations.That one consultation is going to answer that specific questions for her state and her situation. As I said, you can't control your dad's decision, but you can make sure your mom has the right people in her corner.Now, I want to get back to your listener question. You said something in your question that I want to come back to. You said, I'm trying to help my mom protect what's hers.And as a son, your impulse is right. That's love. I love that part about that you're stepping up during a hard time. But here's what I want you to hear. Your job isn't to fix the divorce.Your job isn't to control your dad's bankerby decision. Your job is to help your mom get the right help. There's a difference there and it matters. There are things that you can't control.You can't control what your dad decides. You can't control the court's timeline and you can't control whether the bankruptcy happens.What you can do, what you can control is you can point your mom towards someone who knows the law and her state's rules. That's not weakness. You might feel like, ralph, I feel like there's nothing I can do. That's wisdom.And it's the most important thing you can do right now. You're asking the questions. You're trying to protect your mom. And that tells me she's lucky to have you in her corner.So today's win is very specific. And get your mom connected with a lawyer by the end of this week.If she has a divorce attorney pick up the phone, call that person, tell them what's going on. If she doesn't have an appointment, if she doesn't have an attorney, help her find one.Just one 30 minute consultation is going to answer the question whether her assets are actually at risk. And this isn't overreacting. This is something you've got to do. You've got to get the right people involved before the situation changes.Because once things are finalized, once the bankruptcy is filed, things are going to change and it's going to make it harder to do anything. Let's get right to our Bible verse today. It comes to us from the book of Proverbs, chapter 14, verse 12.It says there is a way that appears to be right but in the end leads to death. Now you may be saying, Ralph, this is a big deal death.The reason I chose that particular verse today is your family is operating on assumptions right now. Your dad thinks filing before the divorce ends will protect your mom. Your mom's afraid it's going to destroy her.You're in the middle trying to figure out who's right. But all of you are working from incomplete information. And Proverb warns us about that.It says what looks right from the outside might lead to the wrong direction. Now here's what that means practically. Get some actual legal advice instead of texting, instead of guessing.I hope you're not doing like Google searches and hoping for the best. The right way forward isn't the one that feels safest, it's the one that's informed. How about we pray together?Heavenly Father, right now I'm praying for a young person watching their parents marriage end and now they're watching their financial security uncertainty.There's a lot going on here, Lord and I just ask right now that you would give their mom courage to reach out for the right help, help her to find that counselor, to help her, give her clarity about what's at risk and, and what's protected and protect them all from those fear driven decisions. Help them see that getting a lawyer isn't weakness, it's actually wisdom. And I want to pray for the listener.Right now they're doing something super important, caring and asking questions. I just ask that you would strengthen them, help them to be there for their mom and their dad at the same time.And we ask all these things in Jesus name. Amen friend. Listen, divorce and bankruptcy is a real combination and it's complicated and you were right to ask that question.So again we talked about the assets, we talked about the risk, we talked about that timing. Your mom needs a lawyer in this conversation today. Not eventually, not down the road Today.Your job again isn't to fix your parents decisions, it's to help your mom get the right people involved and then you can let go of it. If you've got a question for this show, I'd love to hear your voice.You can go to financiallyconfidentchristian.com/voicemail we'll put a link in the show notes. But again, that's financiallyconfidentchristian.com/voicemail thank you so much for joining me today. Thank you for your very honest question today.I am praying that the Lord gives you strength. Stay financially savvy. May God bless you and you have a great day today.