What is the basis for a marital adjustment on the bankruptcy means test?

When you file for bankruptcy, you must take 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, you pass the test. This means you are eligible to use Chapter 7 bankruptcy; if you decide to use Chapter 13 bankruptcy instead, you can propose a three-year repayment plan.

If your income exceeds the median, you still pass the means test if your disposable income, after subtracting certain allowed expenses, is less than a minimum amount set by law. However, if your disposable income is above the limit, the court will conclude that you have enough to fund a repayment plan. If you choose to file for bankruptcy, you will only be allowed to use Chapter 13, not Chapter 7.

If you file jointly with your spouse, all of your combined income is included in the means test. If you file separately, however, you can exclude some or all of your spouse's income (thereby lowering your income total -- and increasing the odds that you will pass the means test) in these circumstances:

• If you and your spouse are legally separated and living apart, you don't have to report any of your spouse's income.
• If you and your spouse haven't separated, you can exclude any income your spouse doesn't contribute to your household. For example, if your spouse pays child support to her ex, you can exclude that amount. Or, if your spouse pays a mortgage on another house he owns alone, you can leave that amount off. This is called a "marital adjustment."