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Social Security Benefits And The Means Test In Chapter 7

If your income is low enough, you will automatically qualify for Chapter 7 bankruptcy. However, many clients have income slightly above the median income level, and must pass The Means Test in order to qualify for Chapter 7. This is not uncommon. The Means Test is simply a comparison of your income to your debts—some actual, and some allowances by the bankruptcy code.

Fortunately, The Means Test focuses on your most recent six months of income. This allows you to take advantage of some timing, if you have inconsistent income or unusual income which will not continue into the future. Your bankruptcy attorney will discuss this in more detail with you.

Types Of Income Included In The Means Test

The safe assumption is that every dollar hitting your accounts each month will be considered income for the purpose of The Means Test. This includes spousal support, support from family members, W-2 income, 1099 income, retirement income, and 401k early withdrawals.

Types Of Income NOT Included In The Means Test

While Veterans’ benefits DO count as income for The Means Test, Social Security benefits DO NOT. This means you may pass The Means Test if a large part of your income each month is Social Security benefits.

Current Monthly Income

Current Monthly Income is different from The Means Test calculation. Once you pass The Means Test, you still have to complete a budget reflective of your current income for the month. This is different from your income from the past six months. Additionally, you get to compare your actual expenses to your actual income for the month, where The Means Test does not always allow you to take your actual expenses. Even though your Social Security benefits will be counted in your Current Monthly Income, if you passed The Means Test, you should have nothing to worry about when it comes to Current Monthly Income calculations.

Further Reading

Want to learn more? Read one of over 100 articles on our Bankruptcy Blog Articles.

Speak With A Charlotte Bankruptcy Lawyer Today

The easiest way to get a better idea of whether you qualify for Chapter 7 is to speak with a Charlotte bankruptcy attorney today. You can call us at 704.749.7747 or click for a FREE CASE EVALUATION. After a brief discussion with an attorney, we can usually give you a good idea as to whether you will qualify for Chapter 7. We can also help confirm if a Chapter 7 or a Chapter 13 is the best choice for you.

Charlotte Chapter 7 Bankruptcy

The purpose of this article is to discuss filing a Charlotte Chapter 7 bankruptcy. Our firm is located in SouthPark in Charlotte, NC and we serve the Charlotte Division of the Western District of North Carolina.

The Need

You’ve probably tried debt settlement, negotiating with creditors, and finally, you’ve threatened bankruptcy. Unfortunately, not much works with big banks. Most clients we work with have really put a lot of pressure on themselves to pay off debts and just can’t get ahead. Finally, they truly consider bankruptcy.

How We Can Help

As a Charlotte bankruptcy attorney, I get to experience the satisfaction of helping people to truly get a fresh start. It is probably the most rewarding aspect of the job. Our team is ready to assess your financial situation and help determine if you will qualify for a Chapter 7 or Chapter 13 bankruptcy in Charlotte, North Carolina.

First of all, we will have you submit some basic information so that we can understand a little more about your assets and income. After reviewing and discussing that information with you, we can tell you if we think you will be a good candidate for bankruptcy. Another thing we discuss is your financial dealings over the recent past—transfers, payments to creditors, new debt, etc. Finally, with your full financial picture completed, we can prepare a bankruptcy petition for you to see if you pass the Means Test in bankruptcy.

The filing of the bankruptcy petition triggers the automatic stay in bankruptcy under 11 U.S. Code section 362. It prevents your creditors from contacting you for the purpose of attempting to collect a debt. The automatic stay is in effect during the duration of your bankruptcy.

Most Chapter 7 filings only require one short court appearance which we attend with you. Furthermore, the appearance is with the bankruptcy Trustee—he or she will ask questions about the petition we submitted. In contrast to what most client believe, creditors rarely attend these meetings.

Lastly, you’ll receive your discharge in bankruptcy. This means your allowable debts incurred prior to filing bankruptcy are no longer your burden.

Next Steps

If you’d like to speak with an attorney about a financial situation, or get a fee for a bankruptcy, please call 704.749.7747. You can also fill out a simple form HERE to request a phone consultation. Consultations are free and we’re here to help. We know you have choices. We hope you choose to Recover With Us.

Chapter 7 — Qualifying For Bankruptcy in CharlotteOne of the myths around qualifying for bankruptcy is that if you make more than a certain amount of income you cannot file. The truth is whether you qualify for bankruptcy is typically determined by examining both your income and your debts and expenses, as a whole.

If you make less than the median income in your state, you will automatically qualify for bankruptcy. The median income is determined by state, and one relevant factor is the size of your household—a word which has a unique definition in bankruptcy. Your bankruptcy attorney can tell you what the median income is in your state, specifically for your household size.

Even if your income exceeds the median income for your household size, you may still pass the Means Test. The Means Test recognizes that just because you have income doesn’t mean you can afford to pay your bills. It essentially compares your income to your expenses and allows deductions for some standard expenses like the operation of a vehicle, or health insurance. Additionally, it allows you to deduct some expenses specific to your situation. Those may be expenses related to caring for an elderly relative, or for your own special needs or circumstances. In this sense, qualifying for bankruptcy becomes an analysis of your own unique situation.

Even if you make more than the median income and fail the Means Test, you may still choose to file a Chapter 13 bankruptcy. The Chapter 13 bankruptcy in this instance recognizes you may have some ability to pay back your bills but not the ability to pay what creditors are asking. It operates to force creditors to accept a reasonable schedule for repayment of your debt and in most cases you pay less than 10% of your total unsecured (credit cards, medical, etc) debt, in exchange for a discharge of the remainder of that debt.

If you have questions about qualifying for Chapter 7, the Means Test, or any other bankruptcy related questions, please call 704.749.7747 to get your questions answered. We’re here to help.