How to determine debtor’s current monthly income?

The Law office of Malik W. Ahmad provides free bankruptcy consultation to all of our clients at this time. An immediate request can be made by calling (702) 270-9100. Most of the time, same day appointments can be made with our law office. We answer most pertinent questions which can be answered in a small window of 15-20 minutes. The client can extend this meeting with a small upfront fee because we cannot see all the financial papers and analyze all the data. Of course, this is a complex legal work and just cannot be done either at home or by talking to your friends who had similar experience. Chances are that their situations may be entirely different than yours.

What is current monthly income?
“Current monthly income”
is defined in section 101 of the bankruptcy Code as the average of the last six months income received by the debtor and the debtor’s spouse, derived during the six-month period, with certain adjustments. As a result, the debtor’s real income at the time the petition is filed may be significantly below or above current monthly income, which is a six-month average.

What is six month period?
The six-month period is defined as the six months ending on the last day of the month before the petition is filed. Thus the timing of filing the petition may determine whether a particular months puts the debtor over or under the mediation income safe harbor, or the amount that would create a presumption of abuse under the means test, or some other consequences.

– If a debtor’s income has recently increased, the debtor may want to file quickly.
– If a debtor’s income has decreased, waiting a few months would be preferable if no emergency requires an immediate filing.

All debtors whose debts are primarily consumer debts, all individual debtors in chapter 11, and all chapter 13 debtors are required to prepare and file a statement of Current Monthly Income, which is included in the interim rules, and forms adopted by the Judicial Conference in order to implement the 2005 Act. In Part II of the Statement, the debtor lists the income information used in calculating current monthly income for the section 707(b)(7) safe harbor. If this current monthly income amount is below the applicable state median income, as reflected in part III of the Statement, the debtor checks the box on the top of th form stating that the “presumption does not arise” and is not required to fill out the remaining means test calculations in Parts IV through VI of the form. Included in current monthly income is any amount paid by any entity toward the household expenses of the debtor or the debtor’s dependents on a regular basis.

How income is calculated in joint case?
If a joint case is filed current monthly income includes all income received by the debtor and the debtor’s spouse. If a married debtor files alone and the debtor’s non-debtor spouse is not a dependent, income received by the non-debtor spouse (or from some other entity) that is not used for the household expenses of the debtor and the debtor’s dependents is not included in current monthly income for purposes of the means test under section 707(b)(2).

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