This is part of our series on How To File Bankruptcy.
In bankruptcy, spousal income is important. But only some of it.
The part of the bankruptcy process that scares my clients most has nothing to do with them.
It’s got to do with their husband or wife, someone who may not even be filing for bankruptcy.
The fear sets in when I tell my client that I need their spouse’s income information in order to complete the bankruptcy documents.
Then I explain the bankruptcy hokey pokey.
Why Your Spouse’s Income Is Required
The means test requires your spouse’s income if you’re legally married and living together.
The goal is to get a better sense of your overall household income.
In addition, the deductions from the means test that follow the income section are higher for larger households. If you’re getting the benefit of a deduction, you need to have the burden of the extra disclosure.
Once We Add, We Subtract
The means test contains a place for what’s called a marital adjustment.
If your husband or wife is using part of their income to cover their separate expenses then we get to back out that amount from the means test.
Just like the hokey pokey, which you probably played as a kid. You put your left foot in, you put your left foot out …
Some examples of separate expenses that can be backed out under the marital adjustment are:
money your spouse pays for his or her tax liability;
funds use by your spouse to support people other than you or your dependents;
expenses for payment of your spouse’s separate debts; and
just about any money not being used for household expenses.
The Spouse Who Won’t Play the Game
From time to time I’ll have a client with a spouse who won’t give up their income information.
Maybe they’re very private. Perhaps they just don’t want to be bothered. It doesn’t matter.
This creates a bit of difficulty, but we can often get past it.
After all, letting your spouse stand in the way of your bankruptcy isn’t the goal of the process – it’s full disclosure and painting a fuller picture of your financial situation.
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