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Filing Ch 7 with income of both spouses which exceeds means test. One spouse retires in few months how does this effect the case

Stone Mountain, GA |

How does change in spouse's income effect Chapter 7 case? One spouse will continue working, the other will have a monthly pension check. How does this work? Can the pension check be used to pay back creditors if case is not accepted or is converted to a Chap 13 due to current salaries?

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Attorney answers 6


First of all, if you are planning to do this pro se, don't! The US Trustee in this district will almost certainly file a challenge. An experienced lawyer can address it.

If a delay in filing is possible, that may be smart. Timing is everything. And you want a good lawyer to be sure that there even is a means test problem. You may not have looked at all the allowable deviations and additions.

Retirement income is used all the time in Chapter 13s.

If you don't yet have a lawyer, feel free to call me (404-768-3509). If you do, speak to him or her.

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Yes, pension money can be and will be used to determine if you qualify for a Ch.7 or Ch.13. You should not FILE bankruptcy until after your spouse retires, but you may want to consult with an attorney now to determine which BK you qualify. If you know what your monthly pension will be, he/she can run the numbers now. If you only qualify for Ch.13 (they are mutually exclusive), your Ch.13 Plan payments will be less after retirement. Good luck.

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I would agree with Mr. Ashman. Each Circuit will handle it a little dfferently. In NJ, you could file the C13 and then convert down to the C7 as not ALL retirement income is part of the Means Test, and by that I mean Social Security as some people interchange the term pension with SS. Standard Pension income is countable for the Means Test, so if you can not wait, you may be able to file the 13 and then convert down, if you do not have to worry about equity issues.

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If you know the amount of the pension, a qualified bankruptcy attorney could look forwards and back to determine whether or not you could still do a chapter 7, or what the dividend to unsecured creditors would be in a chapter 13. If you file chapter 7 and do not pass the means test, the US Trustee will move to dismiss the case or convert it to chapter 13. This not only muddies the waters on your case, create a basis for outright dismissal of the case for bad faith, or could cause you to have to convert to chapter 13 and pay more than your would had you waited because the of plan base and commitment period. Timing of the filing of your case could be crucial. Give me a call or see a bankruptcy attorney from this site for a free consultation to go over all of the income figures and find out what your options are.

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I would consult with a BK attorney in your area to calculate your ch 7 eligibility, based on the drop in household income. Pensions are included in the means test. It may pay to wait up to 6 months after the reduction of income, in order to qualify for ch 7(of course you may be eligible earlier, or not at all) If there a rush to file immediately? If the case is filed with a presumption of abuse, the UST will probably make a motion to dismiss, at which point you must overcome such a presumption or convert to 13.


You should speak with an experienced bankruptcy attorney in your area. Calculating these on your own could be detrimental to your case! You may be eligible for a Chapter 7 with the changes in your income during the next few months. Retirement benefits will be used in calculating the means test, with a few exceptions such as social security.

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