Make Sure to Report The Required Types of Income in Your Chapter 13 Bankruptcy
Posted on Monday, June 23rd, 2014 at 2:30 pm
When filing for a chapter 13 bankruptcy, a debtor is required to list his or her current monthly income on the chapter 13 Means Test. This is important because it allows for the calculation of both the debtor’s commitment period and the debtor’s disposable income. Due to the nature of the chapter 13 bankruptcy, it is sometimes beneficial to the debtor that his or her income be minimal rather than a greater amount. Therefore, it is crucial to know exactly what type of income needs to be listed and what type does not.
- Gross wages
Form 22C indicates that “All figures must reflect average monthly income received from all sources derived during the six calendar months prior to filing the bankruptcy case, ending on the last day of the month before filing.” It is important to realize that if the debtor is married, than he or she must list the spouse’s income, regardless of whether or not it is a joint-bankruptcy.
- Gross income derived from the operation of a business, profession, or farm
In re Wuilnau, the court held the where a debtor receives income from an LLC, that income needs to be included as part of the Current Monthly Income.2012 Bankr. LEXIS 1121 at *10-11 (Bankr. N.D. Ohio March 14, 2012).
Other Forms if Income
- Income derived from rentals or real property
- Interest, dividends, and royalties
- Pension and retirement
- Unemployment compensation (unless it was received by the debtor or the debtor’s spouse as a benefit under the Social Security Act)
- Other sources of income unless specifically excluded.
Certain transactions that have been held to not constitute income for purposes of a chapter 13 are…
- One-time withdrawals from 401(k) or an IRA
- Sales of vehicles in a non-business context – In re Leach, the courts held that income derived from the sale of a vehicle used to purchase a newer vehicle was not income that needed to be included in the chapter 13 Means Test. 61 Collier Bankr. Cas.22d (MB) 15555, 2009 Bankr. LEXIS 1097 at 26 (Bankr. D. Mont. Feb. 26, 2009)
- Transitional bonus payments set off against loan (such as a pay advance)
If you or someone you know may need to file for a chapter 13 bankruptcy, contact Lawrence & Associates today!
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