October, 2014 www.astlelaw.com
Kansas Bankruptcy News
A monthly publication for the non-bankruptcy attorney prepared by the Law Office of
Donald C. Astle, Donald C. Astle Attorney at Law.
345 Riverview Suite 730,Wichita, KS
"Front Loading" Spousal Maintenance
and the "Means Test"

An often used term in consumer bankruptcy is the “means test.” Does the debtor pass or fail the means test? It’s important. It may determine if the debtor must file a Chapter 13 bankruptcy, which is a long and expensive bankruptcy, rather than a much simpler Chapter 7 bankruptcy. As you probably know in Chapter 13 the debtor makes payments over a 36-60 month plan. In Chapter 7 no such payments are made and a discharge is typically granted four to six months after the filing of the bankruptcy. Also, the cost of a Chapter 7 is about a third of the cost of a Chapter 13.
There’s an old saying that there’s a well beaten path between
divorce court and bankruptcy court. The money crunch is often right on the heels of a divorce. In the means test a court ordered payment, like maintenance, really helps an over median income debtor qualify for the simpler and cheaper Chapter 7 bankruptcy.
Let’s take the case where a well paid husband is getting divorced and will pay spousal maintenance. The only question is how much and how long? The husband will also not be able to pay his credit cards and other bills. He will need a bankruptcy.
Normally a divorce attorney will want to make the spousal maintenance as low as possible and extend it as long as possible. Let’s say a $60,000 a year income husband, who will need to file bankruptcy, is to pay $600 per month maintenance over 10 years. Since he is over the median family income of $44,434 per year for a single person he will have to pass the means test to file a Chapter 7 bankruptcy. The $600 per month expense is not enough to pass the means test. Thus, he is looking at $600 for 10 years to the ex-wife. Since he will have to file a Chapter
JP...The Legal Cartoon
Copyright David Carter used with permission.
13 bankruptcy, he’s also looking at 5 years of monthly payments in the Chapter 13 bankruptcy.
Let’s just assume for discussion purposes the payments on the Chapter 13 are also $600 per month. So, the guy is forking over a total of $1200 per month for the ex-wife and the Chapter 13. Why not pay the ex-wife $1200 per month for 5 years, get it over with, if that allows the husband to pass the means test and file a Chapter 7?
Do the math. With the “front loaded” maintenance of $1200 per month for 5 years he pays a grand total of $72,000 only to the ex-wife. With the stretched out $600 per month 10 year maintenance he pays $72,000 to the ex-wife plus $36,000 to the Chapter 13 ($600 per month for 5 years) for a grand total of $108,000! So, everyone is happy with the front loaded maintenance.
Now, sometimes the number won’t work. Sometimes the husband’s income is just too high, or the maintenance too low to justify front loading. But, the savings can be tremendous if the numbers work out. Needless to say, this requires close coordination between the divorce attorney and bankruptcy attorney.
Serving Kansas since 1984, The Law Offices of Donald C. Astle practices exclusively in consumer bankrupcy and collection law.
No other cases are accepted.

Visit our website at www.astlelaw.com
Donald C. Astle
Washburn University, 1984