Related Keywords: retirement income . social security . unemployment compensation .
Current Monthly Income
New subsection 10A of § 101 defines "current monthly income" as the average monthly income received by the debtor from all sources during the six calendar months preceding the filing. (The six-month period ends on the last day of the calendar month preceding the filing. )
"Current monthly income" includes amounts regularly paid by other entities to defray the debtor's household expenses. Therefore, child support receipts are included as income without reference to their treatment by the Internal Revenue Code.
"Current monthly income" does not include payments received under the Social Security Act, payments to victims of war crimes or crimes against humanity, or payments to terrorism victims.
The debtor's current monthly income is no longer a snapshot of income on the date of the commencement of the case. Because it is an average of the debtor's income over the previous six calendar months, interesting anomalies may occur. For example, debtors who experience a dramatic reduction of income immediately prior to filing may fail the means test because their higher income is included in the calculation. In such instances the debtors would be required to show "special circumstances," like the loss of the higher paying job, to rebut the presumption of abuse. (Section 707(b)(2)(B)(i) requires the debtor to show "special circumstances" justifying a reduction of income or additional expenses in order to rebut the presumption of abuse. )
In Chapter 13 Cases
"Under the law predating BAPCPA, a chapter 13 plan may not be confirmed over the objection of the trustee or an unsecured creditor unless the debtor either pays unsecured creditors in full or devotes all "projected disposable income" to the plan for at least three years. Section 1325(b).
BAPCPA makes several important changes in the calculation of disposable income,
If the debtor's annualized current monthly income is larger than the State's median, allowable expenses are determined as provided by the means test under § 707(b)(2).
Conversely, if the debtor's annualized current monthly income is smaller than the State's median, then allowable expenses are those that are reasonably necessary for the maintenance and support of the debtor and the debtor's dependents without reference to § 707(b)(2)importing for some purposes the provisions of 11 U.S.C. § 707(b)(2) allowances and calculations.
Finally, the BAPCPA introduces a new term in § 1325(b)(1)(B): "applicable commitment period." If the annualized current monthly income of the debtor and the debtor's spouse is above the State median, the debtor must pay all disposable income into the plan for a five-year period. However, if the annualized current monthly income of the debtor and the debtor's spouse is below the State median, the debtor must pay all disposable income into the plan for only three years. "
http://www.almb.uscourts.gov/BankruptcyReformImplementation/means_test_dhw.pdf
(Spring 2006)) OUST contends that it includes: gambling winnings, cash gifts (even if not otherwise a "regular contribution"), litigation proceeds, trust income, disability and other non-Social Security disability payments but excludes Social Security benefits (e.g., retirement, survivors, and disability), tax refunds, and loan proceeds.
Does not include income tax refunds
Form 22A, utilizing the definition in §101(10A)(B), and §707(b)(7)(A) and (B), includes the non-filing spouse's income for means testing purposes. See Official Form 22A, Lines 3-10.
However, the debtor is allowed to deduct, as a marital adjustment, the amount of the non-filing spouse's income that was not regularly contributed to the household expenses of the debtor or the debtor's dependents.
See Form 22A, Line 17.
These cases discuss how that deduction works in specific cases.
Particularly when circumstances have changed during the six-month lookback period.
Are distributions from an IRA treated as "income" for purposes of CMI
This issue appears to be mostly confined to the Ninth Circuit but has spread to C.D. Ill.
Determining Current Monthly Income (CMI) is a critical step in determining the length of a Chapter 13 plan. (Your plan must be 3 years if CMI is below the median for your state and 5 years if your CMI is above the median for the your state.)
In the Ninth Circuit, and a few other courts in reported decisions, (C.D. Ill), Chapter 13 debtors are not allowed to deduct business expenses from their gross business income on Form 22C. Instead, they must take those expenses as a deduction, later in the form, to determined "Disposable Monthly Income".
Shifting the expense deduction to a point after the CMI amount has been calculated results in a higher CMI, and far more self-employed people fall into the Above Median category, even if their NET business income is low or non existent.
Even within these jurisdictions, the rule may well be different for Chapter 7 Form 22A versus Chapter 13 Form 22C, given that the override of the instructions in Form 22C was caused by a conflict with a Chapter 13 provision. No such conflict appears with the Chapter 7 form.
see
The Net Effect – Debtors with Business Income Are Permitted to Deduct Ordinary and
Necessary Business Expenses in Calculating Current Monthly Income
http://www.justice.gov/ust/eo/public_affairs/articles/docs/2008/abi_200810.pdf
(argues that Wiegand and Ninth cir rule is problematic)
"The Wiegand approach is arguably problematic. Section 707(b) permits debtors to deduct their “actual monthly expenses for the categories specified as Other Necessary Expenses” by the Internal Revenue Service. See 11 U.S.C. § 707(b)(2)(A)(ii)(I). The Internal Revenue Service, however, does not list business expenses as a specific category. See Internal Revenue Manual, Financial Analysis Handbook § 15.15.1.10, available at http://www.irs.gov/irm/part5/ch15s01 (stating that other expenses “may be considered if . . . they must be for the production of income” but not listing business expenses in a table of 15 “expense items”). Therefore, it appears that, because business expenses are not listed as a specific category, chapter 13 debtors may not deduct their business expenses under “Other Necessary Expenses” as the court advised. The Official Form 22C avoids this problem because it requires debtors to calculate current monthly income by subtracting ordinary and necessary business expenses from gross receipts. "
This issue can depend on state law determinations of how state unemployment insurance is classified.
It is undisputed that Social Security monies are not income. (11 U.S.C. §101(10A)(B). )
The question is whether unemployment insurance is considered a social security benefit under state law.
Some courts follow the Census bureau's "heads on beds" test Ellringer (who was in the household on the filing date). Other courts look to the definition of dependent from the IRS. You need to know what theory your jurisdiction follows. Here are a few selected cases. If you meet both tests, you're probably fine. Note that the U.S. Trustee's office advocates the IRS dependents test, but it depends on what your judge thinks.
Household size matters a lot in the means test. Do you count your unborn child as part of your household? -- because the child WILL be part of your household during the future five years in which you would be paying into a hypothetical Chapter 13 plan...
Household size matters for purposes of median income, and for the amount of the expense allowances you are allowed according to the IRS tables.
Whether you count your joint custody kid as part of your household because they don't have a column for 1.5 people...