It is fairly common for a married individual to file for bankruptcy protection without their spouse. This often occurs for reasons such as:
1. Only that individual has debt or more importantly unmanageable debt
2. The other spouse cannot file because of a previous bankruptcy case
3. One spouse objects to filing on principle or wants to maintain good credit
What most individuals may not know is that even if only one spouse is filing, all household income is used for bankruptcy calculations. This means that the non-filing spouse’s income is counted towards the filing spouse’s household income. Obviously, the filing spouse gets to count the spouse and any dependents as part of his or her household.
This is why the Marital Adjustment is so important. Marital Adjustment allows the reduction of your Current Monthly Income by expenses made by the non-filing spouse. These expenses cannot benefit you or your dependents such as your children. The most obvious examples would be something like separate debts such as a car payment, child support or alimony paid by the non-filing spouse. Do not forget the non-filing spouse’s payroll deductions such as 401k, 403b, plan loans, IRA contributions. It may also be possible for the non-filing spouse to exclude expenses for hobbies, gym memberships and recreation. As always, discuss these matters with a capable bankruptcy lawyer to get legal advice.
In conclusion, Marital Adjustment can be the difference between filing a chapter 7 or a chapter 13 so look at you situation closely and disclose the information to your bankruptcy lawyer. Furthermore, Marital Adjustment can reduce the amount of disposable income available to fund a plan in chapter 13.
Joseph K. Githuku
Disclaimer: This article is provided for informational purposes only and should not be construed in any way as legal advice. This article does not create an attorney-client relationship.