The means test was created to ensure that consumers who have the financial ability to repay some portion of their unsecured debt, do so in a Chapter 13 bankruptcy case. Just about every form of money received or paid on behalf of a prospective bankruptcy filer is included other than Social Security. Thus, perhaps a better way to answer this question is to establish what income is, in fact, included in the means test.

Section 101(10A) of Title 11 (the Bankruptcy Code) mandates that the means test includes income from all sources that the debtor receives… without regard whether such income is taxable income,…  includes any amount paid to any entity other than the debtor… on a regular basis for the household expenses or the debtor or the debtor’s dependents… but excludes benefits received under the Social Security Act.” An obvious inclusion is all income from an employer such as gross wages, overtime, tips, and commissions. Since these are gross amounts, taxes and other typical deductions are not used to set off these amounts, at least, not yet.

Income from the operation of a business or farm is included, as is income from real estate, including all gross receipts during a 6-month period prior to the filing of the bankruptcy case. Income which is derived from interest, dividends, and royalties is also included, as is all pension and retirement income, other than Social Security payments. Thus, governmental non-Social Security and private retirement income from 401(k)s and IRAs of any type is income for purposes of the means test. Thus, while Social security disability benefits are not included, private disability insurance benefits are.

Whether you should file bankruptcy is an important, if not crucial, analysis, Alberto Montefalcon and his experience may be invaluable to anyone who needs to make this determination. Schedule a consultation at any of our three conveniently located offices. Contact the experienced Sacramento metropolitan area/Northern California attorneys at the Montefalcon Law Offices. Contact us online or schedule a free consultation at any of our three conveniently located offices. Telephone our downtown Sacramento office at (916) 444 0440, our south Sacramento office at (916) 399-9944, or our Concord office at (925) 222-5929.