Bankruptcy Calculator | What is the Marital Adjustment Deduction?
Bankruptcy Calculator . What happens if you are filing for bankruptcy and your spouse is not? Accurate calculation of your means test (bankruptcy calcultor) may require you to leverage the marital deduction option. By using the marital deduction you can accurately separate expenses unrelated to your bankruptcy filing. Specifically those incurred by your spouse on a one-time or ongoing basis. Including the costs of daily life, loan or investment payments and reoccurring fees for things like a gym membership or cell phone.means test marital adjustment
If you’re married and filing for bankruptcy without your spouse, you may benefit from the marital adjustment deduction. This deduction will reduce your spouse’s gross adjusted income and could help you qualify for Chapter 7 bankruptcy. Let’s take a closer look at what this bankruptcy calculator means:
What Is It?
If your combined income tips the means test scale, it can be difficult to qualify for a Chapter 7 Bankruptcy. The first step is to work with an experienced bankruptcy attorney to determine what expenses can be separated in order to prepare the most accurate filing possible.
The marital adjustment deduction is basically a group of deductions that your non-filing spouse can take as part of the Means Test. Since the Means Test is used to determine your household income and your eligibility for Chapter 7 bankruptcy, reducing your non-filing spouse’s adjusted income could be beneficial.
By removing the additional and unrelated expenses incurred by your spouse, you’ll be able to file with just your financial information. Placing your expenses and income in the range that would qualify you for a Chapter 7 filing.
How It Works?
There are two parts of the Means Test/Bankruptcy Calculator—adjusted income and deductions. When filling out the adjusted income part, you could make allowable deductions from your non-filing spouse’s income. These deductions include any personal expenses they pay for out of their income that are not related to the household. Examples of personal expenses include student loan payments, alimony payments, cell phone payments and anything else that they use personally and that are not benefiting the household.
When using the marital adjustment deduction, you must not include expenses that will benefit the household or that you (the filing spouse) pay. You also cannot deduct something twice. For example, if your spouse deducts a certain amount for child support payments, you can’t then deduct that amount again in the second part of your Means Test.
While it may take longer to separate your finances, it will be worth the effort. If you are able to qualify for a Chapter 7 bankruptcy, you will be able to discharge a majority of your outstanding debts, compared to a Chapter 13, that requires a re-payment plan negotiated with your debtors.
Bankruptcy trustees are very careful about the marital adjustment deduction, especially if non-filing spouses take large deductions. You will need to provide proof that the expenses are legitimate. It’s a good idea to collect receipts of payments. And when expenses are vague or confusing, provide explanations. The clearer you are, the fewer problems you’ll have with your bankruptcy filing.
If you’re a married bankruptcy filer who is filing without your spouse, you’ll benefit from the marital adjustment deduction if your spouse pays a significant portion of their income to personal expenses or if you’ve taken the Means Test and you are just shy of qualifying for Chapter 7 bankruptcy. A marital adjustment deduction may be what you need to reduce your household income. – startfreshtoday
Have you completed the means test or used the bankruptcy calculator? Contact experienced counsel that can help, Pinkston & Pinkston.