Spousal Waiver of Exemptions

In California, there are two exemption schemes: CCP 703 and CCP 704.  (In rare circumstances the Federal Bankruptcy Exemptions are available as well – but I’m ignoring that for now) Each allows a person filing for bankruptcy to exclude property from the estate.  This is just another way of saying that it is property that would be kept by the debtor in a bankruptcy.

For individuals filing for bankruptcy and using the 703 exemptions (the more common exemption scheme) after separating from their spouse but before a divorce has been filed or finalized, it is essential that a spousal waiver of exemption be obtained from the spouse.  This waives the other persons right to use the 703 exemptions, as the bankruptcy does not want couples double dipping.

This can be a problem if the person filing can’t find the other spouse or the other spouse is unwilling to sign.  This being the case, the best scenario would be to wait until the divorce is finalized.  However, in some situations, if all assets were exempt or most likely uninteresting (i.e. worthless) to a Trustee, it would be okay to go forward without it.

I learned this the hard way when I didn’t get a Spousal Waiver from one of my clients who hadn’t seen his wife in more than five years, but who had never gotten a divorce.  Luckily, there were no assets that the Trustee wanted so converting the exemptions wasn’t necessary.

Bottom line: if you’re separated from your spouse, but your divorce isn’t final, tell your bankruptcy lawyer.

 

 

New Bankruptcy Forms

Substantial changes were made to the bankruptcy petition on December 1st, 2015, probably the most significant changes since October 2005 when BAPCPA was passed.

The intent of the Judicial Conference was to make the petition easier to understand for regular people.  Whether this is the case remains to be seen.

That being said, there has been a lot of think about for us bankruptcy attorneys.  Being a creature of habit, and having handled my fair share of cases, I am embarrassed to say that I’ve had some awkward signing appointments, as my software still looks relatively the same, but the actual physical petition looks radically different.  This has led to some awkward moments where I have had to anxiously flip through the petition to locate a section at the behest of some question that ordinarily I could have answered half asleep.

That being said, here are some notable changes:

1. Gender neutrality (Debtor 1 and Debtor 2) instead of Huband and Wife.  Thanks Obergefell!
2. Lots of different numbers that I have to memorize.
3. Different forms for individuals and non-individuals whereas before they were consolidated.
4. It is now more difficult (well, theoretically) to use bankruptcy to stop evictions, as there are questions that ask the Debtor on Form 101A and Form 101B whether the debtor is in arrears to his or her landlord, whether he can cure the entire amount, and the debtor will give the bankruptcy court this amount 30 days after the case is filed.  If this isn’t done, then the landlord can proceed with the eviction as the automatic stay would expire with respect to the unlawful detainer.
5. Combination of Schedule A and B, so that real estate and personal property is on the same page.
6. Boxes which ask for specific information regarding vehicles which normally would have just been filled in the employ “description box.”  This has led me to file some petitions  which repeats the mileage, model, and make of my client’s car twice.  Whoops.
7. Instructions not to itemize property worth less than $500 or less.  Experienced bankruptcy lawyers already know this, but this will make it much less anxiety provoking and labor intensive for Debtors without representation.  “I have to list EVERYTHING?  Okay.  Let’s specifically list describe each card in my 2,500+ Pokemon collection.”
8. Incorporation of Schwab v. Reilly, 560 U.S. 770 (2010) via language that explicitly communicates that the Trustee doesn’t have to object to exemptions in order to claim a right in unexempt property.
9. Stricter language in the Declaration Concerning Debtor’s Schedules.  Basically the “I promise this is all true” part.  Prior to December 1, 2015, it had to be true to the best of the Debtor’s knowledge.  Now, it simply says “true and correct.”

These are just a few of the changes – nothing too exciting if you’re not already intimately familiar with the forms already, but again, the interest lies in the case law that follows and the manner of enforcement by the courts.  (the proof in the pudding, a cliche I never understood and was always too lazy too google)