A separated couple have the option of filing a Chapter 7 bankruptcy together. Despite keeping separate households, they can still qualify for bankruptcy. However, there are some important things to be considered. Keep reading to avoid some common problems in these type of cases.
First, separated couples will have to file two Schedule Js. Schedule J is a listing of household expenses. Because each spouse maintains a separate household, the bankruptcy court wants to see the breakdown of expenses. This should not be used as an opportunity to inflate expenses to def
Just like with expenses, each spouse must list their respective incomes on Schedule I. A full and accurate accounting of household income is required in order for the court to determine whether the bankruptcy is an abuse. This can be difficult for some couples who may be living with other folks that are bringing income into the household.
Another trap for the unweary is the listing of assets. Just like with all cases, fulling accounting for assets is extremely important in a Chapter 7 Bankruptcy. You must carefully apply the appropriate exemptions to all of the couple’s assets. If not exempted in the correct manner, assets can be seized by the Bankruptcy Trustee and sold for the benefit of your creditors.
Lastly, family transfers of property need to be fully disclosed on the Statement of Financial Affairs. Occasionally I see transfer of cars or even houses amongst separated spouses in anticipation of becoming divorced. These transfers can be a problem if they are not explained correctly on the Statement of Financial Affairs. This issue also comes up after one person files divorce recently after being divorced. The Bankruptcy Trustee will be looking at the marital settlement agreement and any pre-petition transfers. The Trustee looks at these documents to make sure that any transfers were fairly made, and not intended to defraud creditors in a bankruptcy.
Bankruptcy and Separate Households can be tricky. But it is not impossible to file if you are in this situation. Please call my office at (916) 333-2222 if you have any questions about filing bankruptcy as a separated couple.