Does My Stimulus Check Count As Income If I File Bankruptcy?

If you are thinking about filing bankruptcy because of the coronavirus pandemic or are already in a Chapter 13 repayment plan, you may be wondering “will my stimulus check count as income if I file Bankruptcy?” Fortunately, the United States Trustee’s office recently posted an answer to this question. on April 7, 2020  the United States Trustee’s office, stated that stimulus checks should not be included when calculating an individual’s current monthly income. 

Under the Cares Act of 2020, the Federal government will soon begin issuing recovery rebates to qualified individuals. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, the rebates will give individuals who make less than $75,000 a maximum of $1,200. While married couples, who file jointly, and make less than $150,000 will be entitled to a maximum rebate of $2,400. Moreover, an additional $500 will be paid for each qualifying child under the age of 17. 

The United States Trustee decided that the stimulus checks should not be included as disposable income or be counted as current income for purposes of calculating the means test. This means that recovery rebates received within six months before the filing of a bankruptcy petition should not be included in calculating a debtor’s current monthly income in a chapter 7 or chapter 13 case. 

What Is the Bankruptcy Means Test?

The bankruptcy Means Test determines if an individual qualifies for bankruptcy. The Means Test takes into account an individual’s income, and expenses to see what disposable income is left over. Congress enacted the Means Test as a way to stop high wage earners from wiping out all of their debt. The higher the disposable income, the more likely an individual won’t be able to qualify for a Chapter 7 bankruptcy to eliminate their debt. 

The Means Test takes into account an individual’s average income over the last six months. It then compares that number, to the median household income of a family of similar size in the state they live in. For example, if you are a household of four in New Jersey you will only qualify for a Chapter 7 bankruptcy, if your total household income is under the Median household income for a household of four in New Jersey. 

If your income is over the State median income then you will need to go to a second part of the Means Test. The second part of the Means Test takes into account your expenses to determine if you have any disposable income left over. If you have disposable income left over, the Court believes that you should pay some of your debts back in a Chapter 13 bankruptcy. Depending on what your disposable income is you may be required to only pay a portion of your unsecured debts in a Chapter 13 bankruptcy. 

As far as the stimulus checks go, when counting your disposable income for the last six months you will not have to include the stimulus rebate checks into your income if you receive one. This is good news if you were on the verge of not being able to qualify for bankruptcy. 

Should I File Bankruptcy If I am Unemployed because of the Coronavirus 

If you have lost all of your income and are thinking about filing bankruptcy, you are not alone. Many people in New York and New Jersey are facing financial hardships due to the coronavirus pandemic. Individuals left with high debt and no income, are wondering if they should file bankruptcy. 

Bankruptcy laws were enacted to help people who fell into unfortunate circumstances a way to get back on their feet. Bankruptcy allows individuals to start over financially. Many people are under a misguided impression that if they file bankruptcy, they will never get credit again and all of their property will be taken away from them. This is far from true. Individuals can rebuild their credit immediately after receiving their bankruptcy discharge. Moreover, New York and New Jersey have bankruptcy exemptions that allow individuals to file bankruptcy and keep most of their property. 

Bankruptcy is a great tool if you are behind on your debt. One of the most powerful tools that individuals get when filing bankruptcy is the automatic stay. The Automatic Stay prevents creditors from initiating any lawsuits against consumers for owed debts. It also stops wage garnishments and bank levies. 

Consumers and businesses can file bankruptcy to stop creditors from going after them. There are two types of bankruptcy chapters that consumers can file. Chapter 7 and Chapter 13. 

In a Chapter 7 bankruptcy, debts are discharged. This means that debts are eliminated and you will no longer have to pay any debts that are owed. 

In a Chapter 13, the debts are put into a repayment plan. A Chapter 13 bankruptcy is good for people who have high income and assets with equity. 

To determine which chapter of bankruptcy you should file, it is best to speak with a bankruptcy lawyer who can review your financial situation and determine which chapter is best for you. 

The coronavirus has left many individuals in a state of unknown. Many people don’t know if they should file for bankruptcy now or wait. Either way, it is a good idea to start doing some pre bankruptcy planning even if you are unsure if you want to file bankruptcy or not. Karra L. Kingston is a New York and New Jersey bankruptcy lawyer. Karra L. Kingston Esq. has helped many individuals get out of debt and start over. If you have more questions about how the coronavirus will impact your bankruptcy filing our bankruptcy lawyers can help. Give us a call today ar 973-979-9078 or email us at karra@klkbankruptcylawyer.com