How is a Chapter 13 marital adjustment determined?

The marital adjustment refers to the amount of a spouse's income you must include along with your own when you file for bankruptcy alone. You must list this income when you take the means test. 

The Means Test in Chapter 7 and Chapter 13

The means test is used to determine whether a bankruptcy filer is eligible for Chapter 7. If a bankruptcy filer uses Chapter 13 instead (either by choice or because the filer failed the means test and can't use Chapter 7), the results of the means test determine how long the filer's Chapter 13 repayment plan must last and how the filer calculates the expenses he or she can claim. 

A Chapter 13 filer who passes the means test may:

• propose a three-year Chapter 13 repayment plan (those who fail must agree to a five-year plan, unless they will be able to pay off all of their debts sooner), and
• use their actual expenses in calculating how much disposable income they have to pay into their plan (those who fail may not claim more than the amount allowed by the IRS in certain categories, which may be less than their actual expenses; this leads to a higher disposable income figure, and to higher monthly repayment plan payments). 

You pass the means test if your average income over the six months before you file for bankruptcy is less than the median income in your state. Even if your income is higher, you still pass the means test if your disposable income (what's left after subtracting certain expenses) is less than a minimum amount set by law. As you can see, the lower your income, the more likely you are to pass the means test. 

The Marital Adjustment to the Means Test

If you are married, you must include all of your spouse's income along with your own when taking the means test. This is true whether you file jointly or alone. There are two exceptions to this rule, however:

• If you are legally separated and living apart, you don't have to include your spouse's income. 
• If your spouse doesn't contribute all of his or her income to the household, you can subtract the amount that goes elsewhere. For example, if your spouse pays $1,000 in spousal and child support to his ex-wife and children, you can subtract that amount from your total income on the means test form. Similarly, if your spouse pays a mortgage on property she owns separately (for example, a vacation home she inherited from her parents), you can subtract that cost. This is the marital adjustment, and you claim it on the means test form.