In a case where a non-filing spouse generates income, the BAPCPA income analysis can get complicated, in a hurry. The income analysis provided by the labyrinthine bankruptcy amendments of 2005 is far from settled. However, a bankruptcy judge in Florida has qualified the amount of the non-filing spouse's income that must used to calculate the Chapter 13 debtor's current monthly income.
In In re Quarterman, 2006 WL 1234902 (Bkrtcy.M.D.Fla.,2006), the court held that under the "disposable income" test as modified by BAPCPA, the monthly income of a debtor's non-filing spouse must be included in determining current monthly income (CMI), only to the extent that the non-filing spouse contributes his/her income to pay the household expenses of the debtor.
The court began its analysis by noting that Congress amended the definition of disposable income, in section 1325(b)(2), to state that disposable income means "current monthly income" received by the debtors...less amounts reasonably necessary to be expended for the maintenance and support of the debtor and debtor's dependants. Section 101(10)(A) defines CMI as "the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor's spouse receive) without regard to whether such income is taxable...derived during the six month period" prior to filing the bankruptcy petition. The court went on to say that part B of Section 101(10A) provides that CMI also "includes any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor's spouse), on a regular basis for the household expenses of the debtor..."
The Court ruled under BAPCPA that in calculating a debtor's disposable income for Chapter 13 confirmation tests, it is necessary to start with the debtor's current monthly income, which is the debtor's average (gross) monthly income for the previous six months, plus amounts others, i.e. the debtor's non-filing spouse in a single case, regularly contributed to household expenses of the debtor or the debtor's dependants, less other (non-applicable) exclusions, and reduce from it the following amounts: (1) income that is included in current monthly income that was not "received" by the debtor; (2) "amounts reasonably necessary to be expended" by the debtor, whether under ?? 1325(b)(2)(A) and (B) or section 707(b); (3) "child support payments, foster care payments, or disability payments for a dependant child --- to the extent reasonably necessary to be expended for such child"; (4) amounts required to repay a loan described in section 362(b)(19) (loans from qualified plans); and (5) amounts withheld from wages or received by employers as contributions to employee retirement plans.
Stay tuned, this issue will continue to be argued far and wide throughout the bankruptcy community. As with all poorly drafted legislation, BAPCPA creates more questions than answers.
*A NACBA member in Maryland is preparing to challenge the local trustees' practice of including all income of the non-filing spouse, and would be interested in hearing how that income is treated in other areas. Please share your local experiences with us!