Waiver of Right to Claim Exemptions

I am filing for bankruptcy but my wife isn’t. Only one spouse is filing. My attorney has asked me to have her sign a waiver. What does this waiver mean? What is she waiving?

The waiver you are asking about has the long and confusing title of
MUTUAL WAIVER OF RIGHT TO CLAIM STATE EXEMPTIONS, OTHER THAN THOSE PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 703.140(b), DURING PENDENCY OF BANKRUPTCY CASE(California Code of Civil Procedure §703.140(a)(2))
What on earth does this mean? The language of the waiver is very confusing. Let me explain.

In California we have 2 sets of exemptions: The 703 exemptions and the 704 exemptions. When someone files for bankruptcy he must choose which set to use. He can’t use both. And he can’t use some exemptions from one set and some exemptions from the other set.

The 703 exemptions have a $30,825 (as of 7/17/20) wild card exemption that the debtor can use for any property including money in the bank. The 704 exemptions have a large exemption for your home: the greater of $300,000 or the countywide median sale price of a single-family home.

The government was concerned that one spouse (say the husband) might file for bankruptcy and use the 703 exemptions to protect the cash in the bank. And then a little while later the wife would file and use the 704 exemptions to protect the house.

If they could do this they would have the “best of both worlds”. They would protect the cash by the husband’s filing and they would protect the house by the wife’s filing.

The legislature did not want this to happen. So they wrote a law that says that if only one spouse (in our example the husband) is filing the husband may not use the 703 exemptions unless the wife promises not to file for bankruptcy and use the 704 exemptions. The wife only has to promise not to file for bankruptcy using 704 exemptions during the time that the husband’s bankruptcy case in pending.
In other words, by signing the waiver the wife is only giving up her right to file for bankruptcy using the 704 exemptions while the husband’s case is pending.
Unless the wife signs the waiver the husband may not use the 703 exemptions. Ordinarily, this is not a problem. But it can be.

Let’s say the husband and wife aren’t getting along. Perhaps they’re separated. Husband wishes to declare bankruptcy and use the 703 exemptions because he has $20,000 in the bank. But let’s assume the wife refuses to sign the waiver. If that happens then the husband can not use the 703 exemptions. He must use the 704 exemptions. He must spend the $20,000 before he files for bankruptcy because under the 704 exemptions there is no exemption for money in the bank.

Here is the complete text of the waiver we use:
MUTUAL WAIVER OF RIGHT TO CLAIM STATE EXEMPTIONS, OTHER THAN THOSE PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 703.140(b), DURING PENDENCY OF BANKRUPTCY CASE(California Code of Civil Procedure §703.140(a)(2))

1. IDENTIFICATION OF PARTIES. This mutual waiver, is made by ____________________ and
______________________________, husband and wife.
2. PURPOSE OF THIS WAIVER. This waiver is made to satisfy the requirement set forth in California Code of Civil Procedure §703.140(a)(2) regarding the election of exemptions pursuant to §703.140(b) by married debtors who file an individual Bankruptcy petition.
3. LEGAL RIGHTS WAIVED. California Code of Civil Procedure §703.140(a)(2) provides:
IF A PETITION IS FILED INDIVIDUALLY, AND NOT JOINTLY, FOR A HUSBAND OR A WIFE, THE EXEMPTIONS PROVIDED BY THIS CHAPTER OTHER THAN THE PROVISIONS SUBDIVISION (b) ARE APPLICABLE, EXCEPT THAT, IF BOTH HUSBAND AND WIFE EFFECTIVELY WAIVE IN WRITING THE RIGHT TO CLAIM, DURING THE PERIOD THE CASE COMMENCED BY FILING THE PETITION IS PENDING, THE EXEMPTIONS PROVIDED BY THE APPLICABLE EXEMPTION PROVISIONS OF THIS CHAPTER, OTHER THAN SUBDIVISION (b), IN ANY CASE COMMENCED BY FILING A PETITION FOR EITHER OF THEM UNDER TITLE I I OF THE UNITED STATES CODE, THEN THEY MAY ELECT INSTEAD TO USE THE APPLICABLE EXEMPTIONS SET FORTH IN SUBDIVISION (b).
4. RIGHT TO HAVE INDEPENDENT COUNSEL REVIEW WAIVER. Both parties acknowledge that they have been informed of their right to consult an attorney regarding the effect of this waiver on them.
5. MUTUAL WAIVER. Both parties, by executing this agreement below, hereby waive their right to claim any state exemptions, other than those provided in California Code of Civil Procedure §703.140(b), during the pendency of the Chapter 7 Bankruptcy of ________________________, filed in the U.S. Bankruptcy Court for the Southern District of California.
The foregoing is agreed to by:

Dated:

Dated:

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