Couples often ask if they should file separate bankruptcy petitions.

“We have our own debts and don’t think we should file
together,“ they say.

California is a community property state

Those debts the couple thinks are separate usually are not. It doesn’t matter if the debts are only in the name of one spouse. Unless the debt was incurred prior to the marriage or the couple had entered into a valid prenuptial agreement, it is a community debt even if it is only in one name. If the debt is in one name and there is a valid pre-nuptial agreement to keep all finances separate then it would be a separate debt. In addition, if there is not enough separate property to pay separate debts the community assets can be reached by creditors.

Filing Jointly

If both spouses need the protection of the bankruptcy court it is usually easier, more efficient and more economical to file jointly. A joint filing will only require one filing fee. Separate filings require each spouse to pay a filing fee.

All these must be listed whether filing jointly or separately:

  • Community assets    
  • Separate assets  
  • Community liabilities
  • Separate liabilities

If the couple files separately, they need to list everything anyway so it may make sense to file one time and list everything together.

Separate Households

If a couple has been separated for a while and set up two distinct households it might be easier to file separately. Sometimes the spouses cannot communicate well and one spouse doesn’t have all the information needed on the other spouse’s income and expenses. In that case it would likely be better to file an individual bankruptcy.

Sometimes spouses don’t want to communicate and feel as though they would rather not go through this process together.

Nothing in the law requires a couple to file jointly. The decision should depend on the specific circumstances of the couple involved.

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Image credit: Leo Reynolds