Article at a Glance
- You can file for a bankruptcy in California either jointly with your spouse or individually.
- California is a community property state, and even if you file bankruptcy separately without your spouse, your community property is protected. Creditors cannot come after any part of it as long as you are married.
- If you file individually and your spouse does not file, they may not suffer the same negative impact on their credit reports.
If you are married and living in California and are considering filing bankruptcy, you can do so individually without your spouse or file jointly with your spouse. Let’s take a look at the impact of filing bankruptcy individually in California, whether it’s advisable and how it will affect your spouse.
- What Assets Are Part of the Bankruptcy Estate in California?
- What Debts Are Discharged When I File Bankruptcy Individually in California?
- Will My Spouse’s Credit Report Be Affected?
- Will the Court Consider My Spouse’s Income if I File Individually for Bankruptcy in California?
- Should I File Bankruptcy Jointly or Individually in California?
- Weigh Your Situation Before Deciding to File Bankruptcy Separately or Jointly
What Assets Are Part of the Bankruptcy Estate in California?
California is a community property state, which means that barring an agreement to the contrary, property acquired during the marriage normally belongs to both spouses no matter whose name is on the title. That means whether you file a bankruptcy jointly with your spouse or you file individually, all that community property is part of your bankruptcy estate. When you file individually in a community property state like California, a lot more property becomes part of the bankruptcy estate and subject to bankruptcy law than would be the case if you filed individually in a common law state. Your California bankruptcy lawyer can explain what property can be protected by bankruptcy exemptions.
Separate property belonging to your spouse is not part of the bankruptcy estate, but the trustee may still require you to list it in your filing documents. They may want to check your claim that it is separate property rather than community property subject to the bankruptcy court.
What Debts Are Discharged When I File Bankruptcy Individually in California?
When you file for bankruptcy separately without your spouse, only you will get a discharge. All your dischargeable debts that are separate from your spouse will be discharged as will your liability for dischargeable joint debts. Because California is a community property state, creditors may not come after community property that was discharged even if only one spouse filed bankruptcy. Should you get a divorce or die, your non-filing spouse loses this benefit. Also, the creditors may still go after the separate property of the spouse who did not file if they were also liable on the debt.
Will My Spouse’s Credit Report Be Affected?
If you file for bankruptcy individually, your spouse’s credit score and report will usually not be affected despite the effect of the bankruptcy on community property.
Will the Court Consider My Spouse’s Income if I File Individually for Bankruptcy in California?
In California, all income earned by both spouses may be considered by the court as household income in order to determine Chapter 7 eligibility or the amount of payments for Chapter 13.
Should I File Bankruptcy Jointly or Individually in California?
There are many factors that enter into whether or not it’s most beneficial to you to file jointly or individually in California, and they depend on your specific circumstances. But here are two to consider:
- In California, you may be able to take more in the way of exemptions if you file with your spouse, which is a good reason for filing a joint bankruptcy for many people. If you cannot exempt all property without filing jointly, then filing jointly with your spouse may be the better course. Discuss this with your attorney, because you have options regarding exemption methods in California.
- Since creditors cannot come after your community property even if just one of you file bankruptcy, it may be to your advantage to file individually in order to preserve your spouse’s good credit rating.
Weigh Your Situation Before Deciding to File Bankruptcy Separately or Jointly
There are a lot of factors going into the decision of filing bankruptcy separately or jointly. You will want to consider
- What property you own
- Of that property, what is designated community property
- What property is separate property of you and your spouse
- Your credit score and that of your spouse
- The amount of your debt and what kind of debt it is
- Your income and that of your spouse
- Whether you want to make a major purchase that could be denied if you both file bankruptcy
- Other issues your attorney will pinpoint
Your California bankruptcy attorney can analyze your situation and advise you what’s best for your situation.