Is unemployment income counted as “income” on the bankruptcy means test?
Whether you must include unemployment compensation as "income" on the Chapter 7 bankruptcy means test depends on the bankruptcy court.
Whether you must include unemployment compensation as "income" on the Chapter 7 bankruptcy means test depends on the bankruptcy court. Some say yes, and others say no.
(To learn about the means test, including what it is and why it's important, see Chapter 7 Eligibility & the Means Test. )
Bankruptcy Courts Differ on the Issue of Unemployment Income and the Means Test
Bankruptcy courts differ on whether you must include unemployment compensation on the means test. Here's why.
The means test specifically excludes benefits you receive under the Social Security Act (“SSA”) and the federal government provides funding for state unemployment systems in accordance with the SSA. Some bankruptcy courts say that unemployment is a benefit received under the SSA and that therefore you should not include it as income on the means test. Other bankruptcy courts, however, say that unemployment income is not a Social Security benefit, and that you must include it in your means test calculation.
Below are some references to cases in which the courts looked at this issue (this list of cases is not exhaustive). The following courts have held that unemployment compensation should not be included as income on the means test:
- In re Munger, 370 B.R. 21 (Bkrtcy.D.Mass 2007), and
- In re Sorrell, 359 B.R. 167 (Bankr.S.D.Ohio 2007).
These courts have held that unemployment compensation should be included as income on the means test:
- In re Washington, 438 B.R. 348 (M.D.Ala. 2010)
- In re Kurcharz, 418 B.R. 635 (C.D.Ill. 2009), and
- In re Baden, 396 B.R. 617 (Bankr.M.D.Pa. 2008).
You Must List Unemployment Compensation on the Means Test Form
The means test form itself allows you to choose whether to include your unemployment compensation as part of your current monthly income (“CMI”) calculation. The form (B 22A) asks you to list unemployment compensation in the column for total household income, but it also gives you the option of listing your unemployment to the left of this column if you contend that it is a benefit received under the Social Security Act. Either way you choose to list it, the fact remains that you must list it somewhere on the form. And if you list it as a benefit of SS, and not as part of your household income, be aware that the Office of the United States Trustee might disagree with you and argue that it should be included as income.
Even if the U.S. Trustee disagrees with your characterization of unemployment compensation as a SS benefit, it very well may not challenge you on this if it doesn't believe you have enough income to fund a Chapter 13 plan anyway.
Talk to an Attorney
If including your unemployment compensation as income would cause you to fail the means test, it is a good idea to discuss your options with a qualified bankruptcy attorney. A local bankruptcy expert can tell you how the bankruptcy courts and U.S. Trustee in your area treat this issue.