This paper discusses the presumption of abuse in bankruptcy where the debtor has a non-debtor spouse.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) resulted in a shift in law regarding the establishment of abuse where a debtor filing for bankruptcy has a non-filing spouse. Section 707(b)(2) establishes a formulaic approach, referred to as the “means test,” for determining whether a debtor has the means available to repay his or her obligations. Under this section, income is calculated by reference to the debtor’s current monthly income. With some limited exclusions, current monthly income is defined to include the debtor’s average monthly income received from all sources, including that of a non-filing spouse.
Case law has recently emerged which has established that in a single case, a debtor’s spouse’s income shall be included in the debtor’s current monthly income to the extent that it is paid on a regular basis for the household expenses of the debtor or the debtor’s dependents. Therefore, if income is not (1) expended regularly (2) on household expenses, then it is not included in the debtor’s current monthly income and will not be used towards calculation of whether a presumption of abuse arises under section 707(b)(2).
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