Same Sex Marriages and Bankruptcy: A Benefit
By L. Jed Berliner, Springfield Bankruptcy Attorney on Jun 15, 2008 in Bankruptcy Practice and Procedure, Benefits of Bankruptcy, General Bankruptcy Information, Marriage and Debt, Massachusetts, Means Testing
My colleague Michael Doan, for California, and I, for Massachusetts, have written on the need for separate bankruptcy filings by same sex spouses because their marriage is not recognized under the federal Defense of Marriage Act. This federal treatment may well be worth the costs of separate filings. These filers, who together are above median income, might avoid the expensive consequence of a Chapter 13 filiing and a five year mandatory repayment plan.
Federally recognized married debtors must include their spouse’s entire income with their own when filing for bankruptcy protections. They can only deduct the separate expenses of the other spouse, such as a separate car loan, but they cannot deduct the spouse’s share of joint expenses.
Same sex spouses are federally treated as roommates. Under bankruptcy’s means test, they do not include their spouse’s entire income, less separate expenses, with their own income. Instead, they only need to include that part of their spouse’s income which is a contribution to the filer’s own household expenses.
Consider joint expenses. The filing debtor in a federally recognized marriage must consider the spouse’s entire income but cannot deduct any portion of their joint expenses.
The filing debtor in a non-federally recognized marriage is still in a household of two and can use that higher median income as the means test threshold. In re Ellinger, 370 B.R. 905 ( Bankr D MN 2007). However, that filer only needs to include contributions from the same sex debtor to the filer’s household expenses, which is usually half the joint expenses. This can significantly reduce the filer’s income to below the means test threshold, and that is a good thing.
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