Does Your Social Security Count as Income in Phoenix Bankruptcy?
When you file for bankruptcy, which type of bankruptcy you can qualify for and how much you can keep are all dependent on the amount of income you are deemed to have under the eyes of federal bankruptcy law. Many people depend on Social Security to survive from month to month, and still others use it to supplement other income or savings. Does this type of income count as “income” under the Bankruptcy Code?
Social Security can include two different categories of government funds: retirement benefits and disability benefits. Both types are excluded from being considered income for purposes of the Means Test, but may be used to calculate income in order to determine the amount you should pay toward your debts.
The Means Test is the test used to determine whether your income minus allowable expenses is small enough to qualify for Chapter 7 bankruptcy relief. If it is not, you may be required to file for Chapter 13 protection instead. Under the Means Test, you want your income to appear as low as possible in order to qualify for more types of bankruptcy. And the good news is that the Means Test does not take into account Social Security benefits.
Once you have filed for either Chapter 7 or Chapter 13 bankruptcy, your income will be determined in order to figure out how much you can afford to pay creditors. Thus, you want your income to appear as low as possible in this instance as well. Whether Social Security is considered income for the purpose of this calculation has not been completely decided in all jurisdictions. Contact us today to go over your bankruptcy options.