Marital Deduction For Married Debtors Filing Individual Bankruptcy


While the bankruptcy law allows married couples to file joint bankruptcies, this is not a requirement.  A married person may also file an individual bankruptcy, and as a bankruptcy attorney  I see some cases when this is advisable.

One advantage to the individual bankruptcy is that the filing spouse might be able to lower the required payments under a Chapter 13 bankruptcy or even qualify for a Chapter 7 bankruptcy, because the other spouse is retaining his or her debts.

What usually determines the size of a debtor’s payments in a Chapter 13 plan is the “bankruptcy means test.”   This calculation is done on a household basis regardless of whether both spouses are filing.  The test takes the average monthly income for the household and subtracts out the expenses, which the bankruptcy law allows, to determine how much a debtor has available  to pay each month toward his or her debts under a Chapter 13 Bankruptcy plan.  If the available income is low enough, the debtor will qualify for a Chapter 7 Bankruptcy, which requires no monthly payments.

In the case of the married debtor filing alone the means test also includes the so called marital deduction.  This is the amount that the non filing spouse will be required to pay toward his or her debts during the next five years.  While this amount might be discharged, if the spouse joined in the bankruptcy, by opting out these debts remain a necessary household expense with the result that the individual payment toward a bankruptcy plan can be significantly smaller than a joint payment would be.