How is Social Security Income treated in the Bankruptcy Means Test?

The first step in a bankruptcy filing is to determine the debtor’s income in relation to the Current Monthly Income for your state. Assuming the debtor is above that, the more complicated Means Test must be performed.

The outcome of that test will determine either if the debtor qualifies for a Chapter 7 bankruptcy or it will calculate the amount of money the debtor will need to pay to unsecured creditors in a Chapter 13 bankruptcy.

The bankruptcy code says specifically that social security income need not be included in the calculation of Current Monthly Income. And therefore, it isn’t a factor in determining how much a chapter 13 debtor should pay his or her unsecured creditors.

Several Bankruptcy Courts have ruled specifically saying that it isn’t bad faith of the debtor to exclude such income from the calculations. creditors but not include a private retirement account.