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Listing Your Spouse’s Property On Your Bankruptcy Schedules, California Style

Bankruptcy In California Spouse PropertyFiling bankruptcy alone in California may not be so lonely.

We often think of bankruptcy as affecting only the person or people filing the case. The debtor can be a single person or a married couple, a corporation or other business entity.

But when it comes to bankruptcy in California, we need to consider others as well.

In particular, your spouse. Here’s what I mean.

Community Property: California Bankruptcy Boon

In California, the rule of property ownership for spouses is covered under community property rules.

As opposed to most other states, California law states that all property (including real estate, personal property, bank accounts, your sofa, and the like) acquired during the marriage belongs to you and your spouse equally.

Unless you jump through a number of legal hoops to get property titled in a particular way, everything belongs to both of you in equal measure.

Properly leveraged, this can be a terrific leverage point if you happen to be in California and decide to file for bankruptcy.

All Community Property Into The Estate

When you file for bankruptcy, the U.S. Bankruptcy Code requires that all property – including community property – becomes part of the bankruptcy estate.

In other words, when you file for bankruptcy in California you’re required to list all of the property owned by you or your spouse, unless it was obtained prior to your marriage. There are other exceptions as well, but we’ll filter those out together when we talk.

How Separate Property Is Handled In California

Just because you’re married doesn’t mean your property is all community property. Under California law, some of your property may be considered to be separate.

Separate property is property acquired before the marriage or certain types of property during the marriage. If you got the property during the marriage, we’ll work out whether it is properly treated as being separate or community property.

If your spouse has separate property and doesn’t file for bankruptcy with you, that property doesn’t need to be listed in your schedules. We don’t need to concern ourselves with it at all.

Bankruptcy Exemptions And Community Property

When you file your bankruptcy case, we’ll use the California bankruptcy exemptions to maximize the amount of your stuff that you get to keep.

If your property is too valuable to keep in a Chapter 7 bankruptcy, we’ll look into Chapter 13. And if that doesn’t work out, then perhaps bankruptcy isn’t the right fit for your needs.

Plan Your Bankruptcy Steps Carefully

Community property laws can be tricky, and planning your bankruptcy case is important. Make the wrong move and you could find yourself in hot water.

Your spouse could lose property, you could lose the ability to discharge your debts in bankruptcy due to a failure to disclose your community property, or worse.

If we’re working together, we’ll take it step by step – so you and your spouse are protected.

Image credit:   NguyenDai

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By |January 21st, 2013|

About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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