It seems we have seen a run of married couples lately, where only one of the spouses in the marriage is filing bankruptcy. Why is this an issue?
When only one spouse in a married relationship is filing bankruptcy, and the couple shares a common household, the court still asks to see the complete financial picture of the household.
This creates an interesting situation, as the non-filing spouse can spend his/her money how he/she chooses, yet doing so affects the household financial picture for the filing spouse.
So what do we do?
In petitions I have done for attorneys that are representing a married debtor who is filing bankruptcy, but their spouse is not, the income for both spouses needed to be reported on Schedule I, even though one of the couple is not filing.
When income information about the non-filing spouse is requested, I have found it to be common that the debtor will become defensive, wondering why their spouse’s income is needed, and I have had to explain that it’s not me or the attorney that is asking for this information, but rather that the court has asked for this information with the documents that will be filed for their case. This usually goes a long way toward removing the defensiveness, they send the non-filing spouse’s pay stubs, and we can get back to working on their case.
What about the non-filing spouse’s expenses?
So we have income being reported for two people, when only one is filing bankruptcy, and the non-filing spouse is free to spend his/her money how he/she chooses, whether or not it affects the household expenses. How does that work?
Well, in addition to collecting the non-filing spouse’s income, you will want to collect the non-filing spouse’s expenses. I do this by sending them the “Monthly Budget” page of the client intake forms available for free at www.713training.com/intake_forms.
Doing this allows you to see how and where the non-filing spouse’s income is being spent, which you will use on Schedule J of the petition.
But what about the Means Test?
Because the non-filing spouse has his/her own expenses and places he/she is spending his/her income, the Means Test provides for a way to account for this, via what is called a “marital adjustment”.
The marital adjustment allows for entering various expenses, debts, etc. that belong to the non-filing spouse, to appropriately reduce the current monthly income to what is accurate, and the Means Test is able to determine whether the filing spouse has the means to repay some or all of their debt, keeping in mind that the Means Test isn’t perfect.
DISCLAIMER: We at 713 Training are not attorneys; any information provided by 713 Training should not be considered legal advice. The information in this article, and any other materials provided by 713 Training, whether delivered verbally, written or via any other means, including electronic/digital delivery and storage, is for training purposes only, and is intended for individuals who work under the direction of a licensed attorney.
**************************************************
Don’t forget to register for the upcoming 713Training.com seminar in Atlanta, GA on April 23rd and April 24th.
Day 1: VBA Marketing
www.713training.com/shop/cart.php?m=product_detail&relate=1&p=122
Day 2: Chapter 13 Seminar
http://www.713training.com/shop/cart.php?m=product_detail&p=120
