When a married individual chooses to file bankruptcy, it doesn’t always mean that both spouses file jointly. There are certain situations which make it more beneficial for just one spouse to file bankruptcy. In the event one spouse files for Chapter 7 bankruptcy, it is important to understand when and how their spouse’s income will affect their eligibility.
When filing a Chapter 7 bankruptcy, one of the required schedules to be completed is one in which a debtor’s gross income is calculated. Regardless of whether a debtor is filing single or jointly with their spouse, both individuals’ incomes will be combined on this schedule. Even when a debtor is filing individually, the non-filing spouse’s income is included in the gross income calculation. It is with this number that a debtor can verify their eligibility to file for Chapter 7 bankruptcy.
Chapter 7 bankruptcy eligibility is based on income. If a debtor’s gross income exceeds their state’s median income, they must complete a means test to make a further determination of eligibility. On the means test, a debtor has the opportunity to explain why their spouse’s income should not be included in their gross income calculation. If the non-filing spouse has income that is put toward other debts, not included in the bankruptcy petition, they may be able to reduce their total gross income to prove eligibility.
Although the process may seem confusing, it can be made easier by working with an experienced bankruptcy attorney. With their knowledge of bankruptcy law, an attorney can help debtors successfully navigate their way through the bankruptcy schedules and means test to prove eligibility and complete their bankruptcy petition.