In June, people’s thoughts turn to marriage. These days, people’s thoughts also turn to bankruptcy. Clients ask me, “Should I file my bankruptcy case before my wedding?” It’s a good question.
The answer is not always simple. Why should it matter? The main reason is the “means test.” The Bankruptcy Code says that you are presumed to be abusing the system if you try to file a chapter 7 case where your household income exceeds the national median.
In plain English, you and your spouse are considered to be a household. Your income is combined even if you are filing a bankruptcy case and your spouse is not.
Let’s say you’re a construction worker. You’ve been facing tough times lately. You may even have been unemployed. Maybe you’ve been in the hospital with the swine flue and have medical bills. Fortunately, things are looking up now. You’re feeling better and you may have some work over the summer. As a single person, you’d pass the means test easily. Let’s say your fiance is a school principal. He’s makes a nice living – maybe close to $100,000/year. If you waited to file a bankruptcy case until after the wedding, his income would be included as your household income even if your new husband had no intention of filing a bankruptcy case.
It is possible to “overcome the presumption” of abuse by demonstrating all of your husband’s separate expenses making it impossible to support payments to your creditors.
Cases involving one spouse filing a bankruptcy while the other does not lead to sometimes difficult problems. It takes time and effort to analyze and solve them. Bankruptcy attorneys have to charge higher fees for these cases. We would rather not. But Congress makes the rules and we all have to follow them.
So if you are planning a wedding and facing financial difficulties, consider the possibility of wiping the slate clean before the ceremony. It could be one of the most thoughtful wedding gifts you could give to your bride or groom.
Lakelaw helps people in Illinois and Wisconsin solve their bankruptcy problems.
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