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Bankruptcy for individuals can become complicated

No two Maryland families who seek bankruptcy protection will have the exact same set of needs. Each case is unique and is the result of the particular circumstances of the individual or individuals who are seeking debt relief. In many cases, bankruptcy for individuals can become highly complex, especially when business interests are involved.

An example lies in a case in which a man filed for personal bankruptcy after taking over the management of his wife's businesses when she became ill. The husband filed for Chapter 11 bankruptcy because his assets exceeded the cut-off level for individuals seeking Chapter 13 protection. He intended for the bankruptcy filing to include only his personal debts and not those of his wife or her businesses.

The problem arose surrounding the manner in which the man managed those business interests. On multiple occasions, he used funds from his wife's businesses to pay for his own personal expenses. Those expenses included a gym membership, insurance and cable service, among other things. In addition, both he and his wife received periodic paychecks from the businesses, which were deposited into the business accounts.

A lawsuit was filed against his wife and the businesses, demanding that the assets belonging to those entities be included in the man's bankruptcy estate. The Bankruptcy Court weighed in, stating that the businesses were not separate entities apart from the man. Because there was such extensive commingling of funds, the wife's businesses became part of her husband's bankruptcy estate, even though he initially sought a type of bankruptcy for individuals. The case should serve as a warning to Maryland residents about the complex rules that govern bankruptcy cases.  

Source: Bloomberg BNA, "Sick Wife Drawn Into Husband's Bankruptcy Troubles", Stephanie Cumings, Dec. 21, 2015

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