Roommates, Bankruptcy, & the Means Test

by Jeremy J. Cobb on Dec. 07, 2019

Bankruptcy & Debt Bankruptcy Bankruptcy & Debt  Credit & Debt 

Summary: Debtors are often pleasantly surprised to learn that, in Minnesota, roommates generally count toward their household size for purposes of the means test, permitting certain debtors who would otherwise fail the means test, and thus not qualify for a chapter 7 case (permitting almost immediate discharge of all debts, not otherwise dischargeable, without any repayment required, as with a chapter 13 case), to qualify.

Debtors are often pleasantly surprised to learn that, in Minnesota, roommates generally count toward their household size for purposes of the means test, permitting certain debtors who would otherwise fail the means test, and thus not qualify for a chapter 7 case (permitting almost immediate discharge of all debts, not otherwise dischargeable, without any repayment required, as with a chapter 13 case), to qualify.

Judge Kressel ruled in 2009 in a chapter 13 case that a debtor’s roommate was a member of the debtor’s household. In re Bostwick, 406 B.R. 867 (Bankr. D. Minn. 2009). The debtor and roommate were not married and had separate leases and almost entirely separate, unshared expenses.

Mr. Cobb recently won a case in bankruptcy court in which a judgment creditor—a bank that had extended credit to debtor—in whose favor debtor had subsequently given a junior mortgage on her principal residence, sought to dismiss the debtor’s case. The bank’s motion to dismiss turned on this very issue, and Mr. Cobb successfully opposed the motion, winning a denial.

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