Can exempt income be used to determine disposable income?

[grammaw13]

When filing 7 bk, does the trustee use my exempt income when calculating disposable income? My income is 50 percent retirement social security and 50 percent exempted pension. Doing research, I determined that the benefits that my kids draw are not my income, but theirs. So 50 percent of the SS is theirs, not mine.

I’ve been running numbers from the Illinois exemptions and using the housing, auto and living expenses to try to determine disposable income. The numbers all run lower than my actual expenses which shows more disposable income than I really have left. So, I’m wondering if the fact that it’s all exempt income would mean the trustee wouldn’t count it as disposable. Any input is very much appreciated.

[justbroke]

This is an old question but it comes up often. Income that is exempt from process is not "exempt" from counting as income in the Means Test's calculation of current monthly income (CMI). Only three (3) sources of income are not "counted" for purposes of the CMI; income derived as a benefit under the Social Security Act, veteran's benefits (new for 2019), and certain obscure war-related payments.

Didn't you ask this before in https://www.bkforum.com/forum/before...ome-is-exempt? As I wrote before, if you are below-the-median then this is moot. However, your income will still show up on your Schedule I.

How does your automobile expense run higher than the national standards?

Here's the bottom line. If you still have no money left after all your expenses, bankruptcy is not going to solve that problem. Something has to give related to your expenses. If the bankruptcy forms, using the National Standards, are showing that you should have disposable income and you don't, then that could indicate that your expenses are too high for your income.

It is likely that you will need to -- and you should -- get a few free consultations from local attorneys, and have them run the initial numbers. Most people don't ever reach the same number as an attorney and/or the Trustee.

[grammaw13]

Sorry if I’m being redundant. As I reread your post, it did cover much of this. I guess I’m looking for clarification on exactly how the trustee arrives at the disposable income. For instance, will my kids income be included to determine DMI? When I mentioned that my expenses were higher than national standards, that’s because under national standards they include everything under home expenses including cell, home repair, internet, cable, and utilities. My expenses run more than the national standards, which is what it looks like Illinois uses to figure expenses, instead of the total of actual expenses. Same with transportation, if I have this correct, they allow not more than a certain amount toward payments and a set amount for all other car expenses. My car payment and gas, insurance and maintenance actually run more than what is allowed, so that after the total of all allowed expenses the calculations show more disposable income than I actually have.

I read where you said that if I’m under the median income it is a moot point. I guess that’s what is actually bothering me. If a trustee, even though I was under the median income would still look at my disposable income to determine whether or not he/she thought I should actually be in a 13, or does it not go further than the median income test? Also, without debts payments, my disposable income goes up a bit.

I agree that I need to rework my budget to get a handle on things. With recent life changes, things are very different than 5 years ago.

I don’t mean to be annoying and I will get better at following rules of the board as time ones on. I just this weekend began looking at bankruptcy as an option and it has me rattled and full of questions. Thank you for the help.

[justbroke]

It's not easy to explain the mechanics of disposable monthly income (DMI) because every single case is different! The basic mechanics seem easy; take income, subtract allowed expenses, reach DMI. But it's not so simple and can quickly become complex. (There's a calculator at Legal Consumer which tries to help someone calculate DMI, but that calculator is very specific and usually never yields the DMI as calculated by the Trustee and/or your attorney. However, it's a good starting place.)

A Trustee will probably not look into details of your Schedule J (expenses) if you are under-the-median unless it shows a huge disparity from the Means Test. Given that half your income is derived from the Social Security Act and the other is pension, they aren't going to punish you.

In fact most of the time those under-the-median filing Chapter 7 worry for nothing.

[grammaw13]

I’ll check out the calculator and keep reading posts. I’m glad to have found this board. It’s very helpful. Thank you