V. CURRENT MONTHLY INCOME: WHAT INCOME IS INCLUDED?
The means test analysis begins with a determination of the debtor's "current monthly income." The term "current monthly income" (hereinafter referred to as "CMI") is defined at 11 U.S.C. § 101(10A) as the average monthly income from all sources that the debtor receives, whether taxable or not, derived during the six-month period prior to the bankruptcy.
While "income" is not specifically defined in the Bankruptcy Code, courts that have considered the definition have found that it includes any amount received by the debtor except for the categories specifically excluded by 11 U.S.C. § 101(10A). Wages, salary income, tips, bonuses, overtime and commissions are certainly included in the calculation. See In re Zahn, 391 B.R. 840 (8th Cir. B.A.P. 2008) (Chapter 13); In re Weigand, 386 B.R. 238 (Bankr. D. Mont. 2007), rev'd on other grounds, 386 B.R. 238 (9th Cir. B.A.P. 2008) (income is gain from capital or labor less ordinary and necessary business expenses); In re Warren, 2007 WL 2916563 No. 07-60695 (Bankr. D. Mont. Oct. 5, 2007) (Chapter 13) (debtor permitted to deduct basis and costs of sale of real property); Blausey v. U.S. Trustee, 552 F.3d 1124 (9th Cir. 2009) (Chapter 7) (income includes private disability payments, as these amounts are not specifically excluded); In re DeThample, 390 B.R. 716, 719 (Bankr. D. Kan. 2008) (Chapter 13) (Section 101(10A) includes "every dime the debtor gets during the relevant period, except for those amounts specifically excluded"); In re Hedge, 394 B.R. 463 (Bankr. S.D. Ind. 2008); Ranta v. Gorman, 721 F.3d 241 (4th Cir. 2013) (social security income excluded from CMI and projected disposable monthly income for Chapter 13 debtor); In re Glanton, No. 11-CV-00631 (M.D.N.C. May 29, 2012) (unemployment income must be included in CMI calculation, not a "benefit received under the Social Security Act").
The Honoring American Veterans in Extreme Need Act of 2019 ("HAVEN Act") amended Section 101(10A) and excludes certain benefits paid to veterans or their family members from the CMI. These exclusions are: 1) disability and death benefits paid by the Veterans Administration under Title 38 of the United States Code; 2) monthly special compensation for catastrophic injuries or illnesses paid to service members under 37 U.S.C. § 439; 3) any combat-related special compensation paid by the Department of Defense under 10 U.S.C. § 1431a; 4) disability severance pay paid by the Department of Defense under 10 U.S.C. § 1212; 5) disability severance pay paid by the Department of Defense under 10 U.S.C. § 1212; and 6) disability-related military retired pay paid by the Department of Defense to a service member retired under 10 U.S.C. §§ 1201-1202, 1204-1205, except that such payments are excluded from CMI only to the extent that they exceed the military retired pay that the service member would have received if the service member had retired without a disability.
To determine if a veteran's or service member's benefits are eligible to be excluded from the CMI calculation, look to their award letters, paystubs, and service records to see which benefits they are receiving. eBenefits and myPay can also be used to see which types of benefits they receive.
Timing of the petition can also be crucial. 11 U.S.C. § 101(10A)(A) sets forth the time period for measuring current monthly income, limiting CMI to income "received" and "derived" during the six-month period ending on (i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by Section 521(a)(1)(B)(ii); or (ii) the date on which current income is determined by the court for purposes of this title if the debtor does not file the schedule of current income required by Section 521(a)(1)(B)(ii). In the case of a debtor with declining income, it may be best to delay filing until high income months drop from the CMI period. In the case of a debtor with rising income, it is best to file before CMI increases above the abuse threshold.
Forms B 122A-1 and B 122C-1 contain various categories of income, from gross wages at Line 2, to the catch-all "income from other sources" category at Line 10. See Bankruptcy Manual Form Nos. 23 and 27, "Chapter 7 Statement of Your Current Monthly Income (Form B 122A-1; Official Form 122A-1)," and "Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period (Form B 122C-1; Official Form 122C-1)." The following is a summary of each category, including case citations addressing each source.
A. Regular Contributions to Household Expenses (Forms B 122A-1 and B 122C-1, Line 4)
The proper disclosure of household contributions is a frequent source of Section 707(b) litigation. The issue commonly comes up in the context of a debtor and non-filing spouse, but may also be raised regarding...
