SteveP

Chap7 Means Test: Mortgage debt deduction if home CO-OWNED by non-spouse

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In completing the Chapter 7 Means Test in Pennsylvania, can anyone shed light on the Mortgage Debt Payment (Subpart C of Means Test) if a home is CO-OWNED with a non-spouse?

 

Specifically, myself and the co-owner are planning to file bankruptcy (one at a time).  If I file first, can I state that I pay 100% of the mortgage in Subpart C of the Means Test? This would make passing the means test possible.

 

Also, assuming my bankruptcy is granted, can the co-owner THEN file using the same 100% mortgage payment in his Subpart C?

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@SteveP - As an aside, your mortgage holder isn't going to care who files first.  They only care that you are not going to pay.   If you notify them you are filing a BK, they might decide you are going to let the house go - you need to stay in contact with them. 

 

The trustee isn't going to do a whole lot of digging, in my opinion.  For instance, again, in my opinion, they aren't going to pull copies of the deed of trust to see that there are two people on it.  Again, just my opinion.   If your credit report shows the amount of the payment, you might be able to claim the whole thing. 

 

What kind of paperwork are they asking you for?

 

If you declare bankruptcy, then your co-signor is 100% liable any ways.  So if you file first, and then your partner (or whomever) files afterwards, I think it's accurate that they can claim 100% of the payment.  

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I hadn't thought of that.  I guess it would depend on who signed the mortgage.  If both of you did, I'm still guessing that only the one who  files last could claim 100%.  If only one of you did, then only that one could legitimately claim 100%, but that wouldn't automatically transfer the debt to the other.  Now, if one of you was a co-signer (i.e., "...if he does pay, I will...") then it might work.

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Thank you very much for your input. I found the following information on www.bankruptcylawnetwork.com that I believe answers my question specifically.  The only questionable thing would be the "joint checking account" statement - we don't have a joint account, but we do share expenses (mortgage, etc.). I assume this doesn't really matter.

 

“Income” is defined in the bankruptcy law as all income received by the debtor in the six month reporting period, plus any other money paid on a regular basis toward the household expenses of the debtor or his dependents (11 U.S.C. section 101(10A)). This means that if a married couple files a joint bankruptcy case, their income consists of both spouses’ income. This seems simple enough, so far.

 

What if, instead, the husband is filing bankruptcy, but the wife is not? “Income” for the means test will consist of the husband’s income, plus whatever income his wife receives that she pays toward his household expenses. Income she receives that she spends only on herself, for expenses which are not household expenses, is not counted toward his means test income. This is called the “marital adjustment.”

 

For example, income received by the wife which is spent on groceries eaten by the husband is “income,” but income earned by the wife which is spent on her student loan payments is not “income.” In the extreme case where a wife were to pay her entire paycheck toward her own debt payments, none of her income would going toward the husband’s household expenses, and consequently none of her income would be added to her husband’s for his means test income.

 

Here’s another example: a wife files a bankruptcy, but her husband does not file with her. They live in the same household; she is not employed; he is employed; his entire paycheck is spent on rent, groceries, and household living expenses they share; none of his income is spent on anything that is solely for his benefit. The wife’s means test income would be the exact amount of her husband’s income, because he pays all of his income to her household expenses.

 

What if the debtor lives in an apartment with a roommate, and they split the rent, keep separate checking accounts, and otherwise have completely separate financial affairs? The debtor’s means test income would be only his own income, because the roommate’s income is not being paid toward the debtor’s household expenses.

 

Okay, now let’s change the facts slightly: the roommates have a joint checking account and commingle their income, paying for each other’s household expenses from this common checking account. Now, whatever portion of the roommate’s income which is used to pay the debtor’s household expenses will have to be added to the debtor’s means test income.

 

Notice how this is true even if the two are not married. The means test rules apply in this manner to any bankruptcy debtor who has somebody else who is paying his or her income toward the debtor’s household expenses. This “someone else” can be a spouse, live-in girlfriend, platonic friend, gay partner, or anyone on earth; it only matters whether the “someone else’s” income goes toward the debtor’s household expenses.

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