In many cases only one person in a married couple will file a bankruptcy. The non-filing spouse does not have to make the bankruptcy payments in Chapter 13 bankruptcy for the person that files. This does not mean the non-filing spouse can use the bankruptcy as a shield against debt they are cosigned on (with some exceptions) or that it will protect them if the joint creditors come after them – it just means they do not have to contribute money to the case directly.
The court can look at the non-filing spouse’s income in determining how long the bankruptcy will run and they can look at the amount of money the non-filing spouse contributes to household expenses to determine how much the payment in the bankruptcy will be. Chapter 13 bankruptcy cases run a minimum of 36 months if the are below the median income and 60 months if they are above the median. The income from your spouse may move you into a longer case, but a competent attorney will question how much income your spouse contributes to the household to help make that determination.
If I file a bankruptcy and my non-filing spouse contributes nothing to the household expenses and I cover everything then my payments in the bankruptcy are just based on my income. For the moment we will assume he or she is not working. Let’s imagine I have $60,000 in credit card debt and I am proposing a 36 month bankruptcy plan (below the median) where I am paying $400 a month to cover my creditors based on my income minus my expenses. In this example my payments are just based on my income and the household expenses. I am covering the rent or mortgage, utilities, food, insurance and all other general costs of living.
Now let’s imagine my spouse is working and bringing home $2,000 after taxes every month. They contribute $600 to the household bills (the ones I was covering above) and then they make their car payment ($500) and student loan payment ($200) and contribute to retirement ($200) and finally they put some in savings ($300) and give some money to an elderly parent ($200).
The first $600 from my non-filing spouse would increase the household income that was covering the basic household expenses. If we were using the example above I would now have a $1,000 available for my bankruptcy payment.
You may have noticed that in the examples I am paying in $14,400 ($400 over 36 months) and $36,000 ($1,000 over 36 months). In neither case am I paying the creditors in full. These numbers differ from case to case but often we are not paying creditors in full but we are still satisfying the bankruptcy requirements.
In short, your spouse does not have to pay your creditors in your chapter 13 bankrutpcy case, but the income they contribute to the household may impact your ability to make payments to your creditors. Your attorney should cover this in depth with you.
If you have any questions about filing a bankruptcy petition please feel free to call or contact one of our bankruptcy attorneys. We have offices in Wichita, Topeka, Lawrence, and Overland Park. We would be happy to give you a free bankruptcy consultation.