Social Security Income might impact your ability to file a bankruptcy in Oklahoma. If you face financial challenges, bankruptcy may be the solution you need to feel at ease again. However, pursuing bankruptcy might seem overwhelming. Filing for bankruptcy can entail figuring out confusing paperwork and dealing with detailed research about your options. When you decide to file for bankruptcy, several steps are involved in the process. For example, before you can even qualify for a Chapter 7 bankruptcy, you must pass the means test.
What Is The Bankruptcy Means Test?
Congress created the means test in 2005 as the first qualifying step in a Chapter 7 bankruptcy case. You are required to complete a means test before filing for Chapter 7 bankruptcy. A means test calculates your income and expenses. The purpose of the means test is to ensure that Chapter 7 bankruptcy is only used by those who can’t pay off their debts. If you cannot pass a means test, you can still file for a Chapter 13 bankruptcy.
What Determines Your Eligibility Under The Means Test?
There is more than one way to pass a means test and proceed with a Chapter 7 bankruptcy. You can immediately pass the means test if your household income, averaged over the previous six months, is lower than the median income for the same-size household in Oklahoma.
However, if your monthly income is higher than the median, there are other ways to pass the means test. The next stage of the means test calculates your disposable income. Your disposable income is the amount left over after your monthly expenses are deducted from your current monthly income. Your current monthly income is considered your average income over the six months before you declared bankruptcy.
When your expenses are deducted from your income, you pass the means test if there is little to no disposable income left over. In calculating this aspect of the means test, there are ways to qualify even if it seems like your income is too high. But, if you are above the median family income and don’t qualify the bankruptcy trustee will probably file an objection in your case. If this happens the case will be set for an adversary proceeding putting the question before the Judge who will decide.
Calculating Disposable Income in the Means Test?
If you don’t qualify to file a chapter 7 because your income is to high you may still have some options. In those cases where your income is to high you might consider filing a chapter 13. In a chapter 13 you will be required to pay a portion of the debt over a five year period. The payments are made on a monthly basis. The amount of your payment will depend on your disposable income. Determining your disposable income under the means test, applicable deductions can help determine how much of a payment you can make in a chapter 13.
Some of the deductions you can use in calculating your income under the means test include:
- Charitable contributions
- Tax obligations
- Involuntary employment expenses
- Mortgage payments
- Car loans
- Childcare expenses
- Contributions to the care of a chronically ill, elderly, or disabled family member
- Health, disability, or term life insurance costs
- Above-average medical expenses
Other deductions may be available to help you pass the means test, depending on the specific facts of your case.
Is Social Security Considered Income For The Means Test?
Social security is not included when establishing your income under the primary means test. Almost all income sources are factored into the calculation to determine your monthly income except for Social Security benefits. But, if after calculating your social security income, that income leaves you with too much disposable income the bankruptcy trustee will object to the chapter 7. The idea is that you shouldn’t receive a windfall at the expense of your creditors. This is called looking at the secondary means test. If the secondary means test leaves you with little or no disposable income after looking at all sources of income and that extra income is from social security you may still pass the means test.
Oklahoma Bankruptcy Lawyers
If you are facing financial difficulties including judgment liens, bankruptcy may be a solution. When considering filing for bankruptcy, there are important decisions to make that can impact your case. An experienced bankruptcy attorney will be able to help you navigate all the intricacies of bankruptcy proceedings.
The attorneys at Kania Law Office are experienced in bankruptcy cases and can walk you through the process. For more information about how our Tulsa bankruptcy lawyers can help you call 918-743-2233 or contact us online.
If you face financial challenges, bankruptcy may be the solution you need to feel at ease again. However, pursuing bankruptcy might seem overwhelming. Filing for bankruptcy can entail figuring out confusing paperwork and dealing with detailed research about your options.
When you decide to file for bankruptcy, several steps are involved in the process. For example, before you can even qualify for a Chapter 7 bankruptcy, you must pass the means test.