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Spousal bankruptcy – whether property separation

Sometimes one spouse who is an entrepreneur faces financial problems that force him or her to decide to file bankruptcy.
Are the joint assets of the spouses part of the bankruptcy estate in the case of bankruptcy of one of them? Is the property separation an effective protection of the spouse?
Polish law distinguishes two types of matrimonial property regimes: statutory and contractual. The former is created by statute at the moment of marriage. It covers the property acquired during its existence by both spouses or by one of them. The second type is based on an agreement between the spouses, which may extend, limit or establish the separation of the property. When one of the spouses is declared bankrupt, if on the date of declaring bankruptcy there was statutory or contractual community of matrimonial property, the community of matrimonial property – both statutory and contractual – ceases. By operation of law, the spouses become separated. The joint property of the spouses shall automatically become a part of the bankruptcy estate and its division is not allowed. The personal property of the bankrupt spouse is also included in the bankruptcy estate.
Is the property separation effective?
Property separation established between spouses by means of a property agreement is effective in relation to the bankruptcy estate only if the agreement was concluded at least two years before the date of filing the petition for bankruptcy. The same shall apply if the property agreement has limited the community of property. If the period in question is shorter – the agreement shall be ineffective in relation to the bankruptcy estate, as a result of which the joint property of the spouses shall become a part of the bankruptcy estate.
By virtue of the act, property separation arises between spouses. The joint property of the spouses shall automatically become a part of the bankruptcy estate, and its division is not allowed. The personal property of the bankrupt spouse shall also be included in the bankruptcy estate.
It is also important to note that the establishment of the property separation by virtue of the court decision, made within a year before the date of filing the petition to declare bankruptcy, is equally ineffective in relation to the bankruptcy estate.
However, the exception here is the situation in which the petition to establish the property separation was filed at least two years before the bankruptcy petition was filed.
The same is true in case of divorce, separation or incapacitation of one of the spouses. What is important, the divorced spouse of a bankrupt or the spouse of a bankrupt may, by way of an action brought to the bankruptcy court or a plea, demand that the property separation be declared effective in relation to the bankruptcy estate – if at the moment when the property separation arose, he or she did not know that there was a basis for declaring bankruptcy, and the creation of the property separation did not result in harming creditors.
Does the legislator grant the bankrupt spouse any legal protection?
In such a situation, the act gives the possibility to claim the share of joint property in the form of filing a claim by the bankrupt person’s spouse to the bankrupt person’s bankruptcy estate.
The rights and property belonging to the personal property of the bankrupt spouse remain outside the bankruptcy estate. The provisions of the bankruptcy law also stipulate that objects used exclusively by the bankrupt spouse to conduct business or professional activity shall remain outside the bankruptcy estate, even if they would be covered by the marital community property. The only exceptions are those objects that were acquired to the community property within 2 years before the date of filing the petition for bankruptcy.
Re-establishment of joint property upon discontinuance of bankruptcy proceedings
The property separation, which is created at the moment of bankruptcy declaration, ceases at the moment of termination, discontinuance or cancellation of bankruptcy proceedings. It is also worth noting that at that moment statutory community of property is created between spouses. It does not matter what regime prevailed in their marriage before the declaration of bankruptcy. In order for property separation to reappear between spouses, it is necessary to express again the will to establish such a regime.

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