Can I File Bankruptcy Without Involving My Spouse?

March 31, 2010 - PRLog -- If you are married, can you file an individual Chapter 7 or Chapter 13 and not include your spouse?

Yes you can.  However (and you knew there was going to be a "however") your non-filing spouse's income and expense information, and possible his/her asset information may be relevant to your case.

In my pratice, I start my potential client interviews with an overview of the potential client's financial situation.  I first look at the debt side of the ledger to confirm in my own mind that the potential client has enough debt to justify the cost and hassle of bankruptcy.  For example, if a potential has $10,000 of debt total, there are not too many scenarios other than a pending mortgage foreclosure that would lead me to advise bankruptcy.

So, assuming that there is enough debt to move forward, the next thing I look at is household income, regardless of whether the spouse will be involved.  By the way, Georgia is not a community property State.  For those of you who live in community property States, the analysis I am describing may not apply.  My colleagues in the Bankruptcy Law Network are a great resource for bankruptcy advice outside of Georgia.  My colleague Cathy Moran writes often about community property issues and bankruptcy in Bankruptcy Law Network posts.

The median income test requires us to look at household income.  If your combined household income is less than the median for Georgia, then you pass the median income test and we would proceed to preparing a budget.

If your combined household income exceeds the median, then we would proceed to the means test.  The total gross household income is called "Total Income."  However, we are pemitted to subtract from Total Income the portion of your non-filing spouse's income that does not get contributed to paying your household expenses.  After subtracting this part of your spouse's income, we end up with a number called the "Current Monthly Income" or CMI.

For example, if your spouse uses $550 per month to pay for a car in her name only and $300 to pay for her student loan, then the Total Income would be reduced by $850 to calculate the CMI.

The CMI would then be used to calculate your "disposable income" under the means test.

Similarly, when we move out of the land of theory into real life budgeting (also known as the Schedule I & J budget), your spouse's separate expenses count as line item expenses that reduce your disposable income.

One word of caution – the U.S. Trustee as well as the Chapter 7 and Chapter 13 trustees recognize that some debtors will try to manipulate the system by shifting joint household expenses to the non-filing spouse.  Also, your case is likely to draw a "good faith" objection if your budget includes your spouse's $900 per month car payment .   I think that the key concept here is "reasonableness."   Bankruptcy  is intended to balance the rights of creditors with the rights of debtors and the Bankruptcy Court will balk at attempts to manipulate the system.

That being said, individually filed bankruptcies by married debtors are common and should not present any unusual problems.

For more information visit http://www.bankrupcy-alternative.com/laws.html or call us directly.

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