Divorce and Bankruptcy / Means Test

Does Alimony or Child Support Need to Be Reported as Income When Filing Bankruptcy?

When you file bankruptcy you are required to report monthly income, usually for the last 6 months leading up to the filing. This is used to help debtors complete the Means Test which determines eligibility for Chapter 7 bankruptcy while reviewing expenses, debt and household size. In some cases, monthly income may allow a debtor to file Chapter 13 bankruptcy instead of Chapter 7. The test helps determine bankruptcy eligibility by state income requirements.

Alimony and child support payments are considered income that should be reported upon filing. This may have an effect on the outcome of your Means Test. If you are seeking to file Chapter 7 and are receiving support payments, keep in mind they may qualify you for Chapter 13 if the payments push you over the median income threshold for Chapter 7 eligibility. This often depends on other forms of monthly income that contribute to the household.

Aside from reporting previous and current income, your payments for child support, alimony and other income may be calculated to determine what your monthly budget will be in the future. The Means Test also reviews expenses and income/debt ratio against the household to help determine bankruptcy eligibility. If you happen to be above the income requirement for Chapter 7 and qualify for Chapter 13, you’re income calculations may help determine monthly payment affordability.

If you are receiving child support or alimony and are considering bankruptcy as an option, discuss your situation with a qualified bankruptcy attorney.

Reference: http://www.duncanlawonline.com/i-child-support-or-alimony-included-as-income-in-bankruptcy/