I is for Income

What income do I need to disclose in my bankruptcy?

All of it gets listed one way or another. Your wages, commissions, bonuses, regular contributions to the household by a family member or housemate, retirement and pension income, workers compensation and unemployment. Loans don’t count and one-time contributions also don’t count.

Means Test Income

For purposes of the means test, the U.S. Bankruptcy Code defines current monthly income as including: “any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor’s spouse), on a regular basis for the household expenses of the debtor or the debtor’s dependents (and in a joint case the debtor’s spouse if not otherwise a dependent)…” Benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism or domestic terrorism on account of their status as victims of such terrorism are excluded from the means test.

The means test looks back at the past six months on income as defined above. If you file a bankruptcy in January, the past six-month (or look back) period is July through December. It is this six-month period that will determine what your average annual income is. You must compare your average annual income based on the past six-month period to the median average for your state to see if you qualify to file a Chapter 7 bankruptcy. If your income is too high to file a Chapter 7 you may still qualify to file a Chapter 13.

Income on Schedules and the Statement of Financial Affairs (SOFA)

There is a Schedule I for Income where you list your monthly income including Social Security payments and other income that might have been excluded form the means test look back income. This schedule will be compared with your expenses that are listed on another schedule. One of the bankruptcy complexities is that income and financial information is listed in more than one way within the same bankruptcy case.

There is also a question on the SOFA that asks for the past several years of income broken down by wages and other types of income. Your answers to these questions can come form your income tax returns.

For another slant see Jay Fleischman’s I is for Income. Also see Cathy Moran’s I is for IRS and Christopher McAvoy, I is for Income Tax Refunds.

More I’s:

Image credit: Leo Reynolds

 

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