WHAT SOURCES OF INCOME ARE USED TO CALCULATE THE MEANS TEST?
The U.S Bankruptcy Code requires that all sources of income be disclosed on the Means Test. That means any income from any source must be disclosed. However, there are some sources of income that do not require you to add them to the calculations. For example, social security and social security disability income do not qualify. Veteran’s disability income is another source that does not qualify. There are a few others, but most sources of income must be calculated into the test.
Wages, unemployment income, disability other than Social Security or Veteran’s disability, long term care, child support and spousal maintenance must all be calculated into the Means Test. Even nutritional support payments must be calculated into the Means Test. You should let your attorney know about every source of income you have.
Business income is another source of income that must be disclosed and calculated into the Means Test. For business income, though, the net income is used for the Means Test. You must disclose the gross income and what your monthly expenses were to get to the net number for each month.
WHAT IF I PASS THE MEANS TEST – AM I SAFE TO FILE CHAPTER 7 NOW?
The bankruptcy law requires a second test after the Means Test to fully qualify for Chapter 7. While the Means Test reviews your recently past income, your Income and Expenses Schedules review your current income and future income. So, what does that mean? On these Schedules, you are required to report what your income looks like now and going into the future. For one hypothetical example, let’s say you have been unemployed for the last 6 months. You need to file chapter 7 to eliminate debt you have been incurring while unemployed. However, you just landed a great new job paying you good money. You are required to use your income from your new job on your Schedules.
If we take that income and subtract your monthly expenses, and there’s a positive amount of money left over, you might still be looking at chapter 13. Another example, you are working, and your current income shows you qualify for chapter 7, but you expect to get a substantial raise next month. You would be required to use the new income amount showing your raise next month on your bankruptcy Schedules. If, after calculating your new income minus expenses, you show a positive number at the end of the month, then you might be looking at chapter 13.
WHAT IF THE TRUSTEE FINDS OUT MY INCOME INCREASED? CAN THE TRUSTEE FORCE ME INTO CHAPTER 13?
Yes, absolutely. You will be required to submit some documents to the trustee, which might include pay stubs after your case has been filed. If the trustee determines that you could afford to pay some money towards your debt, the trustee can file a request in court to force you to chapter 13. Your best policy is to always consult with a bankruptcy attorney for advice.
Be honest in all dealings with the trustee and the court. Even if you do not qualify for Chapter 7 because of a failed Means Test or high income, a chapter 13 is not deal breaker. I can help you with that, too. Call us today at 623-777-4760 to schedule a free consultation so we can look at your income and see where you stand. Either way, I’ll be able to get you the help you need to get out from underneath your debt.