Are Food Stamps Considered Income in Bankruptcy Filings?

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When you go to file bankruptcy, the court considers your income to determine whether or not you qualify for a Chapter 7 bankruptcy, and in the case of filing a Chapter 13 bankruptcy, to determine the amount of your monthly payments.  Obvious income would be wages earned from employment, self-employment income, social security and child support; but what about government assistance such as food stamps?  In short, food stamps are considered as income for the purposes of a bankruptcy.

Young boy holding the hands of his parents.

The Means Test in a bankruptcy considers most income that you receive: wages, self employment, child support, family support, retirement withdrawals. When you receive food stamps, the monies go straight to a debit card in which you can only use to purchase food in a store that accepts the card.  You cannot get cash back from the card?. However, for the purposes of the Means Test, it is still considered income. Since you can use the governmental assistance to purchase necessities, such as groceries, it is considered to be a part of your monthly income that is calculated under the Means Test. Therefore, it needs to be accurately reflected in both the Means Test and in Schedule I, which is the section that discloses your income to the courts.

What Is Income for Purposes of the Means Test?

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Wait a second…I have to qualify to file bankruptcy?  Isn’t it enough that I just simply cannot pay my bills?  How do I determine whether or not I would qualify?  The answer is simple enough: the Means Test.  What is the Means Test you might ask?  The Means Test is a formula used to determine your ability to pay back all of your debts.  This will help determine whether or not you qualify for a Chapter 7 bankruptcy or if you will need to pay back some of your debts and file a Chapter 13 bankruptcy.   The Means Test will take in consideration all of the income coming into the home, as well as some of the expenses that are coming out.

What is considered income for the purpose of the Means Test? Here are the most common types of income that factor into the Means Test:

Types of Means Test Income

W2 Wages/Tips Self Employment Income (this also includes babysitting income)
Family Support Alimony
Income from Rental Properties Child Support
401k / IRA / Life Insurance Withdrawals Trust Accounts
Unemployment Pensions

 

Almost all income is considered for the purposes of the Means Test. However, there is a small number of sources of income, generally those that derive from the federal Social Security Act, that are not considered for Means Test purposes.

The Means Test regularly changes requirements for each state, currently, North Carolina is as follows:

Household Size: Median Income for Means Test:
1 $37,781
2 $50,630
3 $55,468
4 $67,578

 

Make too much?  Before you get discouraged, there are “qualified” deductions that help bring down that means.  Some qualified deductions are: taxes, medical insurance, life insurance premiums, mandatory deductions from you pay, charitable contributions, court ordered payments, and out of pocket co-pays and prescriptions.

You will need to sit down with your bankruptcy attorney and let them run a complete Means Test on you to determine whether or not you qualify at this time.  Looking at the past six months of pay stubs or a profit and loss will help an attorney determine whether or not you are able to pass the Means Test.