Means Test & Social Security

This is Roger Ghai and I wanted to talk today a little bit about the means test, a different aspect of it, and whether there’s certain types of income and certain employment history is included in the means test. Primarily, I wanted to talk today a little bit about social security. Any social security income that you receive is excluded from the calculation of the means test. In addition, for example, if you are a disabled veteran, you may be eligible to not be subject to the means testing that is currently required for most Americans, or if you were in the military and you incurred most of your debts while you were in the military on active service, then you may also be exempt from having to meet the financial requirements of the means test. Now, that’s just one aspect of determining whether you actually are going to be eligible to file for bankruptcy case, a chapter seven bankruptcy.
Let’s talk about the other aspect of it. The other aspect is your disposable income. Even though, for purposes of the means test, we don’t include your social security income, that can still cause a problem with what we call the disposable income. What I mean by that is this, let’s say that your income is $5,000 and $2,000 of that is not included for purposes of calculating the means test. That would leave you, under the means test, we would only use $3,000 to determine whether you qualify to file chapter 7 under the means test, but you still have $5,000 in income. And let’s say that your monthly expenses are only $3,000. You’ve got a gross income of $5,000 or your net income let’s say is $5,000 and then your expenses are $3,000. That means that you have $2,000 left every single month.
And what that means is that your disposable income is too high for you to qualify for chapter seven bankruptcy case. Even though you would qualify from a means test perspective to file a chapter seven bankruptcy case, you would not qualify under the second prong of the test, which is your disposable income in order to be able to file for chapter seven. If that were the case, and you find yourself in that position, you’d have one legal option, which is to file what we call a chapter 13 bankruptcy case. If you have questions about whether you qualify for filing a bankruptcy case, either because of the means test or because of the amount of your disposable income, feel free to call us at (770) 792-1000.