I'm trying to file for bankruptcy and want to pass the means test and get a chapter 7. In the past, my wife and my annual income would be too high to qualify for a chapter 7, but my wife gave birth to my daughter in the last 6 months, and went on disability and received disability pay.
My question is, since she was on disability, can I exclude the disability pay from the means test calculations? And thus bring my 6 month income low enough to qualify for chapter 7?
Regrettably, and irrationally, while Social Security disability benefits are not counted as income, state temporary disability income is counted as income.
If your wife's temporary disability income is disqualifying you from chapter 7, and she may elect to not return immediately to work when the disability benefits run out it, you may be in a position to rebut the presumption of abuse that arises when you fail the means test by pointing out that she does not have plans to return to full-time employment.
In the end, the purpose of the means test is not to deny you the ability to obtain a discharge, but to make certain that you are not a suitable candidate to make a substantial and meaningful payment in a Chapter 13 plan. If your wife plans to not return to full-time employment, that might very well mean that your prospects of successfully reorganizing in chapter 13 would fail.
Since the ultimate purpose of the means test is not to force into chapter 13 those who cannot succeed, you may be able to convince the office of the United States Trustee that the presumption has been rebooted and proceed with a chapter 7 case.
Atty Heston is correct. Here is a list of what is and what is not included as "income".
You must include all of your income, whether it is taxed or not, except the following:
1. payments you received under the Social Security Act (including Social Security Retirement, SSI, SSDI, and TANF)
Here are some examples of income that should be included:
1. wages, salary, tips, bonuses, overtime, and commissions;
2. net income from the operation of a business, profession, or farm (the amount you report as taxable income, after subtracting reasonable and necessary business expenses on IRS Schedule C)
3. interest, dividends, and royalties
4. net income from rents and other real property income
5. pension and retirement income
6. regular contributions to the household expenses of the debtor or the debtor’s dependents, including child or spousal support
7. regular contributions by the debtor’s spouse (unless you are legally separated)
8. unemployment compensation
9. workers’ compensation insurance
10. state disability insurance, and annuity payments.
You are not my client and I am not your attorney. This advice is given in the spirit of the AVVO platform and is based on general legal principles. You become a client when you enter into a formal retainer agreement with me.
No. Simple as that. But asking means you have not sat down with an experienced bankruptcy attorney DO SO NOW. You may beat the MT on the expense side, can try and overcome the presumption or possibly reduce the INCOME side based on possibly retirement contributions or loan repayments depending on the Judges in your DIstrict on that issue too. But other facts and issues can affect your case too so I will point those out next for you as well.
You need and want to enjoy your fresh start also. But the most important thing is to meet with an attorney as you asking this question means you have not. You care about 2 goals: keeping everything you have equity in and discharging all your debts. If you don't have any of the exceptions to discharge you will obtain that goal; most exceptions are set forth in 11 USC. 523 (Google it) like child support, some income taxes, traffic (in a ch 7) and criminal fines , and presumption of student loans. But some debts are dischargeable in a ch 13 but NOT in a ch 7 so you want to make sure and your attorney will discuss any such types with you also!
Your exemptions depend on what state you have lived in in the last 2 years and thus if in your state, then your states exemptions will apply. Most persons filing keep everything they own but your attorney will confirm that with you when they learn everything you own and the equity thereof!
Some secured debts like homes, vehicles, other secured debts an attorney will discuss your options on also as you must list any debts; but that does not mean you will lose them unless you have too much equity or are in default on paying for them! Discuss those options if they apply with your attorney too.
But other issues can arise that can greatly harm your case. Just one example: If you paid back a relative $3,000 11 months ago and now file bankruptcy next week, the trustee can SUE that relative to retrieve that $3,000 (under what is called a preference) for the benefit of the bankruptcy estate. As a result, most attorneys don't charge to meet with them the first meeting so meet with one no matter what.
Many great attorneys can be found right here on AVVO in your state of CA and seen their great answers here on AVVO, so look, call, and meet one as soon as you can.
You should also want to know when to file: is there an advantage of waiting versus filing now and who should you pay between now and then! Good luck and enjoy your later fresh start.
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