Current Monthly Income When Only One Spouse Files

I have been working on the third edition of my Summary of Bankruptcy Law.  I hope to have it finished this summer.  I noticed a statement I made in the second edition that when a spouse files without the other spouse, the debtor’s current monthly income or CMI is the CMI of both spouses.  I started wondering where it says that and whether that’s even right.  I asked a few friends to comment and of course the simple question became complex although I think, thanks to a couple friends, we at least can give you a straight answer.

Mark Markus, certified bankruptcy specialist, sent me the following email:

Non-filing spouse’s income must be included unless they are separated/living apart (and not just for the purpose of thwarting the means test.
However, portions of the non-filing spouse’s income may be EXCLUDED under the marital adjustment.
The US Trustee guidelines lists the following as allowable exclusions (according to them…for whatever that is worth):
withholding taxes;

  • student loan payments;
  • prior support obligations;
  • debt payments on which only the non-filing spouse is legally liable and where the consideration for the loan exclusively benefits the non-filing spouse. (Credit cards used to pay for household expenses may not be deducted on Line 17).

(https://www.justice.gov/sites/default/files/ust/legacy/2015/03/03/ch7_line_by_line.pdf)

An interesting question arises when the spouses have a prenuptial agreement as to whether all of the non-filing spouse’s income can then be excluded.

But the definition of CMI specifically excludes the income of the non-filing spouse.

So Pat Green, bankruptcy guru in Pasadena, sent me the following email:

Jon

101(10A) definition of CMI uses the phrase “income the debtor receives (or in a joint case the debtor and the debtor’s spouse receive)” in both paragraph A and B. Thus CMI in its definition does not include the debtor’s spouse in a case not filed jointly.

The problem arises because 707(b)(7)(B) says that in a case that is not a joint case, CMI of the debtor spouse shall not be considered for purposes of subparagraph A if the debtor and the debtor spouse are separated under applicable bankruptcy law or the debtor and the debtor spouse are living separate and apart other than for the purpose of evading paragraph a and the debtor files a statement under penalty of perjury saying as much.

Thus 707(b)(7)(B) contradicts 101(10A). Both provisions were enacted at the same time and they must be reconciled. Canons of statutory construction require that that any interpretation must give meaning to both sections and not negate any part of either section.

If 707(b)(7)(B) trumps 101(10A), then the plain language of 101(10A) “income the debtor receives (or in a joint case the debtor and the debtor spouse receive)” is judicially written out of the statute and has no meaning. This violates the canons of statutory construction, so that interpretation cannot valid. However, if one reads 707(b)(7)(B) to be a safe harbor for when a non-filing spouse’s income cannot be included when only one spouse is filing, then it can coexist with 101(10A). From that follows that the nonfiling spouse’s income that is used for household purposes must be included in CMI, but other income is not included. In other words we treat the nonfiling spouse as a roommate. In that way both 101(10A) and 707(b)(7)(B) can be reconciled without making the language in either of them superfluous.

There seems to be a suggestion too that because the earnings are community property, the earnings of both spouses are the earnings of either spouse at least for CMI purposes.

My sister Anne reminds me all the time of her two rules:  Rule 1 – Don’t sweat the small stuff.  Rule 2 – It’s all small stuff.

The bulk of the time the income of the non-filing spouse is being used “regularly” to pay household expenses and then certainly the net is part of CMI per the definition in 101.  Because the income is community property, assuming it is, it is probably “all income from whatever source” and therefore part of CMI.   If you don’t include it in CMI for means test purposes, the UST can make a good argument that at least for abuse purposes, it should be considered – per Pat Green’s analysis.  Beyond that, if you want to take the position that it is not part of CMI, I’m with you.  The UST does make an effort to tell us that they are advocates.  Their opinion should be treated no differently than your opponent.  In other words, its not personal.  Say your position, let the judge rule, and get on with it.

 

 

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