What Is Income for Purposes of the Means Test?

/in , , , , , , , /by

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.