If a couple are separated now and the husband filed for bankruptcy while they were together, he placed an asset that was in both their names within the case. At the time of divorce or when any support is decided, is the wife responsible for 1/2 the amount placed in bankruptcy for that particular asset if that is only joint debt or asset. This is a car and the wife's insurance paid off all the balance on the car except what was placed within the bankruptcy and the amt paid was more than 1/2 owed. All this took place prior to the separation except what is being paid to the bankruptcy court which is ongoing.
Answer
It sounds like a Chapter 13 Bankruptcy because you refer to "what is being paid to the bankruptcy court which is ongoing" Note that Assuming that is true, the question asks: Does the wife owe the debt on the car which is jointly owned and what happens to the car with some debt at the time of filing. On a preliminary basis, you have to look at the schedules filed in bankruptcy. They will tell you if the husband's 1/2 interest in the car was exempted by him. The schedules will also tell what the husbands intentions are: He must reaffirm, or redeem, the debt, or surrender the car to the creditor. If he reaffirms and pays in the plan, no problem. If he redeems (pays the fair value) in the plan, no problem. If he surrenders, then the debt must be paid by the wife to prevent repossession and sale of the car with loss of the wife's equity. The divorce proceedings are not stayed and the wife could cause the divorce court to make some award that is in the nature of alimony or child support to protect the car. Normally the issues are larger in a divorce case. The wife's interest is not an asset of the estate and remains vested in her. Note: From a creditor's standpoint the amount paid by the wife is applied to the entire balance and the remaining balance is a joint debt, meaning the creditor can collect some or all from either debtor, except that it cannot collect from the husband because of the bankruptcy. I do not know what kind insurance would pay more than 1/2 of the balance to the creditor on behalf of the wife, but some factual circumstance may give rise to an equitable argument, that is, that it is not fair to let the husband discharge his debt and require the wife to pay the remaining balance of the debt on the car to keep it. If she does not prevail in such argument, then, if she pays it off, she should be awarded the car. The direct answer to the first question is yes. If the wife signed on the note, she is liable to the creditor. If she pays off the full amount without prior arrangement or agreement, she and husband each own a 1/2 interest in a car free and clear, that is, she made a gift of 1/2 of the payment to husband. Thus, full ownership must be resolved prior to the wife paying off the car. If no agreement can be made, the divorce court will impose a settlement regarding the car. At least the automatic stay prevents repossession of the car during the bankruptcy as long as the creditor doesn't demand a stay modification to allow repossession and sale. If the creditor does, the wife could show up in bankruptcy court and propose to make "adequate protection" payments to the creditor and be protected in those payments with credit to her interest in the car or refund of payments if the car is ultimately sold by the creditor or husband or eventual trustee in a Chapter 7 case. The first thing is for the wife to decide how she wants this matter to turn out, that is, get the car, get paid for the interest in the car, or get free of the debt and abandon the car or some other result. The next step is to consult a divorce lawyer, who may consult with a bankruptcy lawyer. Note that there are time limits as to when you can bring an adversary proceeding in any bankruptcy case.
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