Many social security income (SSI) recipients question whether or not their monthly SSI will keep them from being able to file for Ch. 7 bankruptcy. The answer, as with most bankruptcy filings, will depend on each specific case.
The Courts have ruled that SSI does not have to be included when calculating an individual’s means test income. This means test calculates a six-month average of an individual’s income and determines their disposable income per month. The fact that SSI is not factored into this equation allows for the majority of recipients of SSI to qualify for a Ch. 7 case. However, this is not the only prong that must be satisfied.
Potential debtors must also satisfy the “totality of the circumstances” prong, which includes providing the courts with an accurate and detailed income and budget. These income and budget sheets (Schedules I & J, respectively) must include all income and all expenses. Therefore, the SSI that a debtor did not include on the means test will have to be included on their Schedule I. So what does that mean? Potentially, a debtor who beats the means test because they didn’t have to include the $2100/mo they receive in SSI could be disqualified from filing a Ch. 7 if they cannot show that their monthly expenses virtually outweigh their total monthly income. Debtors must also show that their monthly expenses are “reasonable.” A potential Ch. 7 filer may not just add frivolous or extravagant expenses to overcome the “totality” test. The Courts have said that “what is relevant to a debtor’s financial situation is a review of the debtor’s expenses to determine whether they are excessive or otherwise unreasonable.”
If you have questions concerning your ability to file Chapter 7 bankruptcy as it relates to your receiving SSI, please speak with one of our experienced attorneys at Jeff Field & Associates.