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Q and A

April 23, 2021

If I am filing chapter 13 Bankruptcy and My spouse is not joint filing Will the courts look at purchases she makes?

I am filing chapter 13 as recommended by my attorney My wife and I keep our finances separate but do have a joint account we use to pay shared bills. She wants to buy an RV to use as a rental. to help us earn more money. I just filed chapter 13 she is worried if she buys this it will affect my case. (we did not both file BK just me She is listed due to shared household income to establish my repayment details and such.

I usually recommend that married couples file jointly. This is not a requirement of the bankruptcy code, but it is highly recommended. My practice is in California, which is a community property state. This means that for purposes of Chapter 13 bankruptcy the household income (both spouses if they are living together) are counted for purposes of the means test and the disposable income calculation. Debt is purely contractual in nature. There is no such thing as community debt. So, if you file separately your spouses’ debts will not become part of the bankruptcy unless you are also contractually liable for the debts (such as a co-borrower). This means that your wife’s income will be counted as part of your disposable income, but her debts will have to still be paid outside the bankruptcy. If you wife were to purchase an RV shortly before you file, the bankruptcy the trustee is going to ask where she got the money, she used to purchase it. If she finances, it then she will have an additional monthly payment you will have to subtract from your budget on schedule J. Then the trustee will ask if the rental income from the RV exceeds the monthly RV payment and if it does not then the trustee will probably object to the RV payment as not reasonable or necessary. My recommendation would be for both of you to hold off on large purchases and not to borrow money while you are in or contemplating a bankruptcy.