Many clients are concerned that the collective income in their household will bar them from filing a Chapter 7 bankruptcy. While there are income thresholds whereby you automatically qualify for a Chapter 7, there are also adjustments that can be made when your income exceeds those thresholds. Married couples have options when it comes to filing, and sometimes leaving a non-filing spouse makes the most sense.
Both Incomes Are Considered
Take an example where the husband makes $50,000 and the wife makes $60,000. If the husband were to file for Chapter 7 without the wife, the husband’s income would count at $50,000. The wife’s income, however, would not count dollar for dollar. The adjustment is made when completing the Means Test, which has two parts where you get to deduct expenses from your income. So, even with significant income, if your allowable expenses are high enough, you can still qualify.
Two Deductions
First, you are given deductions for your living expenses and debt payments. These are items you, the filing spouse, are contributing to, and they include your mortgage payment, your groceries, cell phone, etc.
Second, you look at any non-household expenses thaourt y non-filing spouse is regularly paying. These might include credit cards in her name only, medical bills, etc. These expenses being paid for by the non-filing spouse are then subtracted from her income. This serves to lower the total income counted for the Means Test and assists greatly in getting you qualified under the test.
Why Are There Deductions For The Non-filing Spouse?
The reasoning behind this is that those separately paid non-household expenses are not contributing to the household expenses. In this way, the bankruptcy code is not counting that income ‘against you.’ An attorney can assist you in a close examination of your total household expenses and help categorize them as household related or otherwise. Once the adjustments have been made, the attorney will let you know your options.
If you’d like to speak to a Charlotte Bankruptcy attorney today, call me at 704.749.7747. You can also email me HERE or take a few minutes to fill in our bankruptcy evaluation HERE. I will contact you immediately to discuss your situation and help you take next steps.