Full question:
Do I have to report my wife's income when completing the means test for a business (corporation) chapter 7 bankruptcy?
- Category: Bankruptcy
- Date:
- State: New York
Answer:
Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, individuals filing for Chapter 7 bankruptcy must undergo a "means test" to determine eligibility. This test assesses whether the debtor's income exceeds certain thresholds. However, if the debtor's primary debts are business-related or tax debts, they can file for Chapter 7 without going through the median income test or means test.
If the individual debtor's "current monthly income" is above the state median, the means test is applied to evaluate if the Chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor's total current monthly income over five years, minus specific allowable expenses, exceeds (i) $10,000 or (ii) 25% of the debtor's nonpriority unsecured debt, provided that this amount is at least $6,000. The debtor can challenge this presumption by demonstrating special circumstances that justify additional expenses or adjustments to their current monthly income. If the presumption of abuse is not overcome, the case may be converted to Chapter 13 (with the debtor's consent) or dismissed (11 U.S.C. § 707(b)(1)).
In terms of income reporting, "current monthly income" includes the average monthly income received over the six months before filing, which encompasses contributions to household expenses from nondebtors and income from the debtor's spouse if filing jointly. However, it does not include social security income or certain payments made to crime victims (11 U.S.C. § 101(10A)).
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.