Do I Have To List All Of My Income In Bankruptcy?
Most sources of income must be listed and disclosed in your bankruptcy petition. There are several very specific exceptions within the Bankruptcy Code:
- Social Security Benefits
- Payments to Victims of War Crimes/Terrorism
- Payments to Victims of Natural Disasters or Crimes
- COVID-19 Relief Payments
- Foster Car Payments/Reimbursements
- Child Support Payments – these are excluded from the Current Monthly Income Analysis, but must be included on Schedule I along with the accompanying expenses included in Schedule J. These differences will be discused next.
- Benefits under the Railroad Retirement Act
- VA Disability Benefits (usually) – again, excluded from the Current Monthly Income Analysis but included on Schedule I
- One-Time Gifts/Sporadic Family Help – this is case law driven, not statutory, so not necessarily the rule in every jurisdiction
- Proceeds from Sale of Property
All other income must be disclosed and included on the bankruptcy petition.
There are two places in the bankruptcy petition where income is disclosed, the Current Monthly Income Analysis and Schedule I, and they have two very different purposes.
The Current Monthly Income Analysis (the “CMI”) is a test to determine whether or not you qualify for Chapter 7 bankruptcy and, if not, can determine how much debt you are required to pay back in a Chapter 13 bankruptcy. For our purposes, recognize that the CMI is a backwards looking test. It analyzes your actual income from all included sources over the six months leading up to the bankruptcy filing, compares your average monthly income to a national standard based on your geography and household size and determines whether or not you are under or over the average (median) income level. If you are under, you qualify for a Chapter 7, though you are certainly still eligible to file for Chapter 13. If you are over, then you must complete a second step, called the Disposeable Monthly Income Analysis (the “DMI”) to determine whether you can file for Chapter 7 or must file a Chapter 13. This reduces your reasonable and necessary monthly expenses from your average monthly income. If there is substantial income left after reducing expenses, you have to file for Chapter 13 protection. If the resulting number is low, zero or negative, as many are, then you have backed into eligibility to file for Chapter 7. All income from all sources that is not specifically excepted above must be included in this calculation and it is based on the immediate six calendar months prior to your filing.
Schedule I, on the other hand, is a projection of what your monthly income is going to be moving forward through the case. Schedule I has fewer exclusions than the CMI, but some are still applicable. In Chapter 7, you are proving that you do not have enough income to pay your debts after you pay your necessary monthly expenses, so excluding the income allowed is a benefit to you. In Chapter 13, you must prove that you can afford to pay your necessary monthly expenses and pay the proposed Chapter 13 plan payment. For this reason, you may want to include income that can be excluded but that you need to include in order to prove that you can make all required payments.
Balancing the requirements of the Current Monthly Income Analysis and the Schedule I disclosure requirements is one of many reasons that you will benefit from having an experienced bankruptcy attorney represent you through the process.
