Under Chapter 7 bankruptcy, people in Tennessee understand that they are agreeing to liquidate their assets. The liquidation essentially will enable the court trustee to pay off debtors and gives people the ability to start from scratch and rebuild their financial lives. However, questions can arise over what property can be sought by creditors, especially when only one spouse is filing for bankruptcy.
One court was asked to determine whether a wife's separately owned businesses were eligible for liquidation in her husband's Chapter 7 bankruptcy. The husband had been depositing Social Security checks and paychecks into the accounts for the businesses and used money from the same accounts to pay personal debts and expenses. These expenses included the couple's mortgage, his bankruptcy attorney's retainer, insurance and a gym membership.
The husband, furthermore, had ran the businesses due to his wife's illness and the court used this information to determine that this behavior of mixing business and personal funds and expenses, qualified the wife and the businesses as alter egos. Even though the spouses didn't work for one of the businesses, they still received paychecks from that business. As such, the court ruled that the businesses and wife's assets did qualify them as subject to the bankruptcy proceeding.
When people are thinking about filing for bankruptcy, they should take the time to understand how their management of their finances may affect the process. Bankruptcy can quickly become complicated if there are a large number of assets and these assets have a high net worth. Therefore, they may find that it is a good idea for them to meet with an attorney who can provide them with quality counsel.
Source: Bloomberg, "Sick Wife Drawn Into Husband's Bankruptcy Troubles," Stephanie Cumings, Dec. 22, 2015