Filing A Separate Bankruptcy

If you are going to be filing a separate bankruptcy while you are married, be sure that your spouse is willing to sign a waiver.  If you are married, you may file a joint or separate bankruptcy, just like you may file a joint or individual tax return.  For this purpose, it does not matter whether you are living together or separated.

When you file bankruptcy, you get to exempt (protect) some of what you own.  In chapter 7 bankruptcy, the trustee will take what you can’t protect, and sell it to pay your creditors.  In chapter 13 bankruptcy, the amount of equity in unprotected property increases your plan payments to the trustee.

In California you may choose either the wildcard exemption system or the homestead exemption system to protect your property.  If you don’t have any or much equity in your home, you want to use the wildcard system, which at this time provides almost $30,000 of exemptions for anything or any number of things, in addition to other exemptions like regular household items, a car, and jewelry.  However, you may only use the wildcard system once for both of you, regardless of whether you file an individual or joint bankruptcy.

If you are filing separately, in order to use the wildcard system your non-filing spouse must sign an exemption waiver, swearing under oath that they will not file their own separate bankruptcy and use the wildcard system again.  If your non-filing spouse refuses to sign, you may not use the wildcard system.  If you were to file a chapter 7 assuming that your separated spouse will sign the waiver and they refuse to sign, you could lose some property to the trustee that the homestead system does not protect.

Be sure that your non-filing spouse is willing to sign this waiver before filing bankruptcy.  You may want to file regardless, but you should know ahead of time what you’ll be getting into.  If you have in serious debt problems, contact a bankruptcy attorney today.