The bankruptcy means test treats child support as income. That is difficult for many debtors to understand since the government does not tax child support as income. Monthly child support can have a significant impact on a debtor seeking to file a Chapter 7 bankruptcy case because the means test calculates the debtor’s average income for the previous six months. When child support is added to the mix, it can sometimes push the debtor’s income above the state median income for the debtor’s household size. In simple terms, child support can cause you to fail the means test, you are presumptively disqualified from filing Chapter 7, and you can only file under Chapter 13 (or possibly Chapter 11).
Well, maybe yes and maybe no.
In addition to having an impact on your means test calculation, child support is also considered when determining your monthly disposable income. When completing the Chapter 13 means test form, child support is added as income, then later subtracted back out! Carefully examine Lines 54 and 58 of the means test, Form B22C. You will discover that your monthly child support is listed on Line 54, but is subtracted from income on Line 58.
The consequence of this is reducing your disposable monthly income and possibly re-qualifying you for a Chapter 7 case. First you failed the means test ad were disqualified to file chapter 7 on account of child support payments, then you failed the disposable income test because there isn’t enough money to pay unsecured creditors without the child support. Using the calculations provided by Congress: two fails equals a pass!
If you are need bankruptcy relief and are receiving child support, speak with a bankruptcy attorney about your options. Bankruptcy can be a very strange and wacky journey for the uninitiated, so be sure that you have an experienced guide to help you achieve a fresh start.