The Marital Offset – Bankruptcy’s Affect on the Non-Filing Spouse
A bankruptcy where one spouse files and the other doesn’t can be complicated. The non-filing spouse’s income must be included in the Means Test, Form 22A or 22C. This is true even if a divorce is pending and they couple is living apart.
In the Means Test, you must calculate the current monthly income by averaging the gross income for the six months prior to filing bankruptcy. This includes the non-filing spouse’s gross income. The bankruptcy court then adjusts for the non-filing spouses expenses by what is called the Marital Offset. For example, the non-filing spouse’s car payment, credit cards, taxes, and other expenses that does not contribute to the household or are for the non-filing spouses benefit only removed from the calculations using the Marital Offset. The non-filing spouse can also deduct expenses that a Debtor, the spouse filing bankruptcy, cannot such as student loan payments and retirement contributions.
During Chapter 7, payments continue for student loans. In Chapter 13, student loan payments are deferred during the pendency of the bankruptcy and those payments are not calculated as an expense when determining the Disposable Income.
The trustee can object to the marital deductions so you should limit the expenses to actual and reasonable expenses. The Debtor is trying to discharge their debt. That is why it is important to consult an attorney in these situations. An experienced bankruptcy attorney can make sure that all of the non-filing spouse’s expenses are accounted for and excluded from the household expenses.