You may incur debts before or during your legal separation that make bankruptcy an attractive option, since bankruptcy can help you get back on your feet financially. Your legal separation in Washington state does not affect your ability to file for bankruptcy, but special rules apply to alimony and child support that you owe or receive.
Washington allows couples to obtain a legal separation instead of divorce or as a precursor to divorce. Legal separations settle the same issues as divorce, including debt division, child custody, child support, property division and alimony, but the couple remains legally married. A Washington court can issue a legal separation order, similar to a divorce order, that is fully enforceable in Washington state courts and federal bankruptcy cases.
Federal courts handle bankruptcy cases, and there are two federal bankruptcy courts in Washington. You may wish to file under Chapter 7, under which some of your assets may be sold to pay your creditors, but you must first qualify financially. To qualify, your income must be below Washington’s median income. If your income is over the median, you must pass the means test, which measures your disposable income – income minus allowable expenses – over five years. If this is low enough, you can file under Chapter 7. If not, you can still file under Chapter 13, which structures a repayment plan for some or all of your debt over a three- or five-year period. You may file for individual bankruptcy if your spouse does not wish to file as a couple.
Under Chapter 7, certain assets of the debtor are exempt from being seized and sold to pay creditors. In Washington, you can claim exemptions according to either the federal or state exemption list. Both lists will exempt alimony and child support payments you receive that are needed for support. Other typical exemptions include certain equity in your residence, household furnishings, a vehicle, clothing and family keepsakes.
Bankruptcy and Separation
While bankruptcy doesn’t automatically affect your separation order, you may address the bankruptcy in your separation order if you are considering bankruptcy when you separate. Since alimony and child support are normally exempt from Chapter 7 seizure, you may wish to plan your separation order to maximize the amounts being paid or received as alimony and child support if you are the receiving spouse. If you are the paying spouse, you must continue paying your child support and spousal support obligations as directed by your separation order since those debts usually cannot be eliminated in bankruptcy cases. Even after other debts are discharged, you must pay any past due support amounts.