Want a Shorter Chapter 13 Plan? Get a Divorce.

31 Jan Want a Shorter Chapter 13 Plan? Get a Divorce.

BAPCPA in effect punishes married Ch. 13 bankruptcy filers if their non-filing spouse has a “decent” income by forcing them into longer plans. One solution might be to get a divorce.

Most courts hold that if your income is above the median income for your state, then your Chapter 13 repayment plan must extend for five, not three, years. That usually means counting every penny of income or you and your spouse during the “CMI period.” But what if your spouse doesn’t need to file with you?

Too bad, our bankruptcy court in St. Louis recently concluded. The law allows you to take out your non-filing spouse’s income in calculating the amount of your monthly payment in Chapter 13 — if that money is not used for household expenses (e.g. your spouse’s credit card repayment) — but not for determining how long you must make the payment. The critical difference being the word “combined” in 1325(b)(4) but not in 101(10A). Unfortunately I can’t find a flaw in the court’s logic, this seems to be the malicious intention of the 2005 Congress. If you make a commitment to support another person come hell or high water, Congress wants that to help your creditors more than it helps your family.

The result of course is that the law encourages a Chapter 13 debtor to consider getting a divorce from his higher income spouse before filing. The statute does not require every penny of an ex-spouse’s income to be counted, only that income contributed to the household expenses (or the debtor’s debts). The payment calculation will still be based on what the person can reasonably afford. But you are given the opportunity to try to do so in a shorter period of time. Who he lives with or marries after that would not seem to be an issue. The law doesn’t mind if you live in sin!

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2018 I am also serving on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website: STLBankruptcy.com
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