Before your debts can be discharged through Chapter 7 bankruptcy, you first have to pass a means test to ensure that you qualify for this bankruptcy. If you are married, then you have the option to file jointly for bankruptcy or to file separately. If you choose to file on your own, you can use the marital adjustment deduction on your means test, and this deduction can be the difference between your being able to file or not, especially if your spouse (who is not filing for bankruptcy) has considerably more income. Read on to understand this deduction more and how it can affect your bankruptcy process.

First of all, the means test is meant to exclude people from bankruptcy protections if they actually have the means to get themselves out of debt. In this way, Chapter 7 bankruptcy is meant to be reserved for those who actually need the discharge, who actually cannot repay their debts. How the means test works is that your income is compared to the state's median income. If your income is lower, then you should qualify. If you make more than the median income, however, you might be disqualified from Chapter 7 bankruptcy (though Chapter 13 bankruptcy may still be a good option for you). That being said, if your income is higher than the state median, then you might be able to deduct things from your income to make yourself eligible.

The marital adjustment deduction is only available to couples who are living in the same household, and many of these deductions would normally not apply if a couple files for joint bankruptcy under any circumstance. Now if you are in a separation (and claim separate households), then you automatically would not include your spouse's income into your means test anyway. If you and your spouse live in the same household, however, then you would normally have to put your non-filing spouse's income in the means test.

On the means test, there are two places where you can put down deductions. Part IV is where you could put a marital adjustment deduction, and Part V is where you could put down standard deductions for your costs of living and your bills (like your mortgage, utilities, groceries, etc.). If your non-filing spouse is the one who pays for living expenses, then these expenses would not get included in the marital adjustment deduction, but they would go under Part V. But under marital adjustment deductions, you can deduct what your spouse pays for non-household expenses. This means that only the portion of your spouse's income that goes toward household expenses gets counted in the means test.

So what are non-household expenses? The types of expenditures that would be allowed under the marital adjustment deduction will sometimes simply depend on the bankruptcy court. But payroll deductions (taxes, union dues, insurance, etc.), 401(k) loan repayments, and credit card payments made from a card only under your spouse's name would likely be counted as marital adjustment deductions. You could also include cell phone bills for your spouse's phone, and expenses related to your spouse's vehicle, such as payments and insurance. You could also count your spouse's student loan payments. Other deductions from items that are only under your spouse's name include: child support for their children in a different household; alimony; business expenses for travel, food, and uniforms; lawyer fees; gym memberships; and real estate costs, such as a mortgage.

Just be sure that you only put down deductions once. You cannot put down the same deduction in both Part IV and Part V. You could not include payroll deductions for your spouse's income tax if you two filed for your income taxes jointly, for example. This payroll deduction would be used in Part V as a household expense deduction, so you could not put it down again as a marital adjustment deduction.

Now if you need to put down a huge marital adjustment deduction, and if your spouse nets a much greater income, then a bankruptcy or U.S. trustee will probably scrutinize your application. To be prepared for this, you want to stock up on your financial records. You may have to prove that the expenses you put down are real, and that they have in fact been paid for by your spouse. Otherwise, a court may invalidate a few deductions or every single one. And this could be enough to dismiss your bankruptcy case. To learn more about how to successfully discharge your debt, contact an experienced bankruptcy lawyer today!