I receive Social Security benefits in addition to my employment income. Can I still pass the chapter 7 bankruptcy means test? Are these types of income counted?
If you receive Social Security benefits, you are not required to include that income on the Chapter 7 bankruptcy
means test. This means that whether you pass the means test depends on
the amount of your income excluding Social Security. Read on to learn
more about how you can pass the means test even if you collect Social
Security benefits in addition to employment income.
order to qualify for Chapter 7 bankruptcy, you must not have the means
to pay back your unsecured creditors. As a result, Congress created the
means test to determine who is eligible to file for Chapter 7
bankruptcy. Here is how it works.
On the means test, you are
required to disclose your income from almost all sources (with a few
exceptions including Social Security benefits) received during the
six-month period prior to filing for bankruptcy. The means test uses
these figures to calculate your current monthly income (CMI).
your annualized CMI is less than the median income of your state for a
similar household, you automatically pass the means test. If your CMI is
above median, you need to complete the rest of the form and take your
expenses into account to determine if you qualify.
(For more details on the means test and how it works, see our Chapter 7 Means Test topic area.)
calculate your CMI, the means test combines your monthly income from
almost all sources. However, benefits received under the Social Security
Act are one of the few exceptions. Social Security benefits don’t count
as income for means test purposes.
As a result, you are not
required to list your Social Security income on the means test. This
means that it is not part of your CMI calculation and does not affect
whether you pass the means test or not.
has a job and makes $3,500 a month from his employment. In addition, he
collects $1,000 a month from Social Security. He is single and has no
other sources of income. The median income for a single-person household
in his state is $48,000 per year ($4,000 per month). Even though Steve
has a total monthly income of $4,500, he is not required to include his
Social Security income on the means test. This means he still passes the
means test automatically because his CMI for means test purposes is
only $3,500, which is below the state median.
addition to completing the means test, you must disclose your current
budget on Schedules I and J of your bankruptcy paperwork. Schedule I is a snapshot of your current income as of the time of filing your bankruptcy while Schedule J is a list of your current expenses.
though you are not required to list your Social Security income on the
means test, you must include it on Schedule I when calculating your
budget. Be aware that if your budget shows a significant amount of
disposable income each month, you may still be disqualified from filing
for Chapter 7 based on a lack of good faith even if you pass the means
by: Baran Bulkat, Attorney