Lesbian partner’s bankruptcy

Letter to “Ask Leon”

We are a lesbian couple living in Ohio. We got married in Ontario, Canada, but are American citizens. We are aware we have no marital rights and that we are considered “roommates” at best. My partner is planning on filing for a Chapter 7 bankruptcy. The title to our truck is in both of our names, as is the insurance policy. Should we take her name off of both until the bankruptcy clears? If her name is kept on the title, do we risk losing our vehicle? Can the insurance company cancel our insurance policy after she files because her name is on it as well? Are there any special circumstances regarding gay couples and bankruptcy? We live together and share finances (bank accounts, credit cards). Will this affect me as well? Thank you so much in advance.

Leon Says…

There are no special provisions regarding gay couples and bankruptcy. If the vehicle is “exempt”, she won’t lose it provided that you continue to make all of the required payments on time, keep it insured, and she will probably need to reaffirm the truck loan.

I certainly think your credit will be affected with respect to each joint debt that you have in common. The assets that she will get to keep, that are “exempt” from liquidation in the bankruptcy process, such as the car, money, bank accounts etc. that she owns separately or that you own jointly with her are generally determined under the law of the state where you live. For more reading about exemptions you can go to:
http://www.debt-relief-bankruptcy.com/faq-browse11-5/bankruptcy-guide.asp for a discussion about exemptions.

You said you are thinking about taking her name off of the car. People will sometimes transfer assets prior to filing bankruptcy, because they think that this is how to protect it from being taken away. This is a good example of a costly legal mistake that people often make, which an expert would easily have avoided. Do not attempt to omit such assets from the bankruptcy schedules. Do not hide, conceal, transfer, or falsely encumber non exempt assets. Doing so carries the risk of being prosecuted for committing bankruptcy crimes, it is likely to result in the denial of a bankruptcy discharge, and the trustee can still recover such property, or its value, from whoever it was given to. If such property is recovered by a trustee, the debtor can not then claim it as exempt, even if it could have been properly exempted before such transfer. Surrendering non exempt assets is a price the debtor pays for the privilege of seeking relief under Chapter 7. If the price is too steep, (you don’t want to risk losing non exempt assets), then don’t file or else consider filing under Chapter 13. One of the requirements for gaining confirmation of a Chapter 13 Plan is that the Plan pays creditors the same value that they would have received from non exempt assets if the case was administered under Chapter 7.

I doubt that the insurance company will care about your partner’s bankruptcy. Please go see an experienced local bankruptcy attorney for guidance. Most bankruptcy lawyers do not charge for a consultation.