So, you're considering filing for bankruptcy relief but you're married and wondering if you need your spouse's information. The short answer is yes, you do. But why is that?
Well, when you file for bankruptcy, you're required to disclose your income and expenses. If you're married, your spouse's income and expenses are also taken into account, even if you're filing separately. This is because bankruptcy law recognizes that your spouse's income and expenses can affect your financial situation.
Now, let's talk about whether filing a joint bankruptcy or individual bankruptcy is the right choice for you. There are several factors to consider, such as the type and amount of debt you have, your income, and your assets. It's important to consult with a bankruptcy attorney to determine the best course of action for your specific situation.
Non-Filing Spouse’s Income Counts for Household Income and Expenses in a Bankruptcy Case
When filing for bankruptcy relief under Chapter 7 or Chapter 13, it is mandatory to report all household income, regardless of who earns it. This includes your spouse's income if you live together. However, if you and your spouse maintain separate households, with each of you being entirely responsible for your respective households, you may not need to include your spouse's income in your bankruptcy case.
Keep in mind that this rule has very limited exceptions. For example, if you and your spouse are separated but live together for the benefit of your children or economic purposes, you may be able to exclude your spouse's income. However, this is a complicated issue, and it's best to consult an experienced bankruptcy lawyer before filing your case.
If you want to argue that your spouse is just a “roommate,” you would need to provide overwhelming evidence that you or your spouse is technically “renting” a portion of the house. Even if you could win that argument, the “rent” you receive from your spouse would be included in your bankruptcy case as income. Therefore, it's usually best to include your spouse's income in your bankruptcy filing.
Consulting a bankruptcy lawyer can help you navigate the complex rules and regulations surrounding bankruptcy and provide you with the best advice for your unique situation.
You Can Include Your Spouses Expenses as Well as Income
Here's some good news for couples considering bankruptcy: you can include your spouse's expenses in the household budget. This means that if your spouse has debts in her name that she needs to pay, those debts can be included in the household budget through the "marital deduction". However, it's important to note that filing for bankruptcy doesn't erase debts that are solely in your spouse's name. But including those debts in the household budget could help you qualify for Chapter 7 or reduce your payments under a Chapter 13 filing.
Reasons Why a Married Person Would File Bankruptcy Separately
When it comes to filing for bankruptcy, most couples choose to file a joint case. There are many benefits to filing jointly, such as only having to pay one court filing fee and one fee for bankruptcy classes. Additionally, attorneys charge the same fee for single and joint bankruptcy cases. Filing jointly also allows couples to get rid of all marital unsecured debts with one filing, including debts held in their names alone. It saves time by having only one court hearing for both spouses, and it gives the couple a fresh start to rebuild their finances together.
However, there are situations where it might make sense for spouses to file separately. For example, if the non-filing spouse does not have any debts in their name or joint debt with the spouse, filing for bankruptcy would not be in their best interest. Additionally, if one spouse owns substantial equity in separate property, filing jointly could result in those assets becoming part of the joint bankruptcy estate and potentially being liquidated to pay unsecured debts. It's important to speak with a bankruptcy lawyer if you have substantial assets and your spouse wants to file for bankruptcy relief.
NOTE: If you live in a community property state, it's important to talk with a bankruptcy attorney about your situation. In community property states, both spouses are equally liable for marital debts. It's important to get the facts from a bankruptcy lawyer before deciding what works best for you.
In some cases, couples may need to file different chapters of bankruptcy. For example, if one spouse owes back domestic support payments (alimony and child support), they may file under Chapter 13 to enter a repayment plan to spread the past due domestic support payments over 60 months. Meanwhile, the other spouse may file under Chapter 7 to eliminate their debts in about six months. It's important to speak with a bankruptcy lawyer to determine the best course of action for your specific situation.
Does Including My Spouse’s Income Mean I Cannot File Chapter 7?
Do you think your income level can prevent you from receiving a bankruptcy discharge under Chapter 7? Well, not necessarily. The Bankruptcy Code considers your gross household income and the number of people in your home when determining your eligibility for a bankruptcy discharge under Chapter 7.
For instance, if you are filing for Chapter 7 in South Carolina, your average income will be compared to the median income for South Carolina residents. However, it's worth noting that the government updates the figures for the means test every few months, so it's essential to check the latest numbers.
On March 14, 2022, the median income for a one-person household in South Carolina is $49,999. If your average yearly income is below this figure, you can pass the means test and qualify for a bankruptcy discharge under Chapter 7. However, if you have more people in your household, the median income increases accordingly.
For instance, if you have a spouse and two dependent children, your household will be considered to have four people, and the median income will be $86,278 in South Carolina on March 14, 2022. If you fail the Chapter 7 means test, you could still receive a bankruptcy discharge if your disposable income is zero or below a specific amount.
Suppose you and your spouse earn more than the median income. In that case, you might still qualify for Chapter 7 by deducting your monthly expenses from your income to calculate your disposable income. Disposable income is the money you can use to pay creditors after deducting allowable monthly expenses from your income.
Are You Confused About Being Married and Filing Bankruptcy Separately?
Are you feeling overwhelmed about the idea of filing for bankruptcy while being married? Don't worry, you're not alone. Even attorneys who don't specialize in bankruptcy law can find the rules confusing.
We offer a variety of free tools that can assist you in deciding whether Chapter 7 or Chapter 13 bankruptcy is right for you. You can access these tools for free on our website by clicking on the following links:
- Chapter 7 Bankruptcy Calculator
- Chapter 13 Bankruptcy Calculator
- Bankruptcy Exemptions Calculator
- Debt Relief Comparison Calculator
If you're still unsure about what to do, don't hesitate to contact us and speak to one of our team members. It won't cost you anything to talk with us.
Most of our services are free to use because we want to help you find the quickest and least expensive way to get out of debt and back on the road to financial recovery.
Contact Us Today for More Information
We understand that dealing with debt can be overwhelming, which is why we offer both bankruptcy and non-bankruptcy solutions. If you're considering bankruptcy, we can connect you with a local attorney who provides free consultations.
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