Is this INCOME on the MEANS TEST?

[gman]

Ugh...a lawyer just emailed me saying the following is income on the Means Test.

Scenario:

I will be receiving $100/week for 50 weeks as part of a PROPERTY SETTLEMENT in a divorce.

How on Earth could this possibly be income? It is NOT alimony.

Any ideas?

P.S. Not a single other attorney (out of 8 total) said this was income. They said it was an asset (and needed to be listed as such.)

[ccsjoe]

gman, the way my attorney addressed a similar scenario was as follows: If you start receiving prior to filing, then count the received portion as income for the means test-NOTE: Only the received portion, so if you only received 1 payment of 100, then your means test monthly income would be affected as follows: 100/6. If you start receiving it after filing, then count it as an asset and seek to exempt it, as it is a settlement, not regular income. So basically, you will need to exempt the 5000 you will be receiving.

[gman]

gman, the way my attorney addressed a similar scenario was as follows: If you start receiving prior to filing, then count the received portion as income for the means test-NOTE: Only the received portion, so if you only received 1 payment of 100, then your means test monthly income would be affected as follows: 100/6. If you start receiving it after filing, then count it as an asset and seek to exempt it, as it is a settlement, not regular income. So basically, you will need to exempt the 5000 you will be receiving.

Whew....that makes sense.

Though this will not come into play on Schedule J because I am over $4,000 negative - what's your take on counting the $100 payments as "income" on Schedule I?

[ccsjoe]

Honestly, I think it's going to depend on the trustee only because of the length of time during which you will receive this. If I were you, I would indicate that you will be receiving a property setllement from divorce of 5K in installments (would not specify number unless asked by trustee), and seek to exclude the total amount as an asset. I would not include it as income. This is what I did with a over 5K settlement I got from BofA after I filed. It is a 4 part payout, but I only listed total amount on Schedule B, Part 21, as Bank of America Class Action Settlement, exempted it on Schedule C, and listed it on Part 4 of the Statement of Financial Affairs.

[ccsjoe]

Here's another angle as well, just for you to have up your sleeve. Within the 6 month lookback I received over 4K in cash for keys from Fannie Mae. Our attorney told us it would not count as income for means test pruposes and instead listed it in statement of financial affairs, part 2, and indicated he has argued one-time payments successfully with our district's trustees so as to exclude them from means test.

[keptdigging]

The econ grad in me goes NUTS over all this. Payments in a marital property settlement, would presumably be receiving your share of marital property (or cash in lieu of). How can receiving your own property be income?

And if it IS income, then you haven't earned it yet and it's not an asset!

I know, I know, this is the bankruptcy rabbit hole and economic logic doesn't apply. But even the tax code makes more sense.

Please excuse my rant and do not confuse it with any advise.
=====
HOWEVER... in my own case, my own attorney has taken the position that "selling my stuff" does not produce income. Even if there's a gain. (But should someone object we'll just amend, we won't be fighting as the test case in our district, as counting the gains doesn't affect my Ch. 7 eligibility.)

[biotechsolution]

If you are over 4,000 in the negative and those are secured payments (mortgage, car) you may get a 707 objection from the UST for 'totalitary of circumstances'.

[Logan]

I sold stock options and while my lawyer said it was a gray area he treated as a sale of an asset and we did not count it towards the means test. It wouldn't of mattered much anyways since I still would have passed the means test.

Logan

[gman]

If you are over 4,000 in the negative and those are secured payments (mortgage, car) you may get a 707 objection from the UST for 'totalitary of circumstances'.

In my case, the only secured and priority claims are a single car loan (under 450/mo) and past taxes that are not dischargeable.

I think the totality of circumstances argument will not apply in my situation.

Time will tell.

[gman]

The econ grad in me goes NUTS over all this. Payments in a marital property settlement, would presumably be receiving your share of marital property (or cash in lieu of). How can receiving your own property be income?

And if it IS income, then you haven't earned it yet and it's not an asset!

I know, I know, this is the bankruptcy rabbit hole and economic logic doesn't apply. But even the tax code makes more sense.

Please excuse my rant and do not confuse it with any advise.
=====
HOWEVER... in my own case, my own attorney has taken the position that "selling my stuff" does not produce income. Even if there's a gain. (But should someone object we'll just amend, we won't be fighting as the test case in our district, as counting the gains doesn't affect my Ch. 7 eligibility.)

Funny - I have an econ degree as well!

Anyway - I am leaning toward not putting it down as income. It is an asset only, one that they can come after (assuming I do not have the exemption to cover it.)

It is either an asset or income, not both.

With that being said, this whole process is like playing WHACK-A-MOLE. Once you think you have everything nailed down....another mole pops his head out.

[HHM]

The problem with these questions is how broadly the BK code defines income.

the average monthly income from all sourcesthat the debtor receives without regard to whether such income is taxable income, derived during the six-month period...

Basically, if it money received by the debtor, it counts. (except for SSI and SSDI and victims of war crimes, terrorism, etc).

The definition very much blurs the line between asset and income. Unfortunately, mos courts take a broad view of the subject and count most things as income.

[keptdigging]

I just got back from my 341. We disclosed large sales of my coin collection over the last two years on my petition. My attorney took the position "selling your stuff is not income," but did prepare me for it to be an issue.

Did not hear a peep about it.

Now I realize that the 341 doesn't close the matter... but it's certainly a good sign. And for me, this shows the importance of attorney judgment... which is tough when attorneys don't agree.

Actually I think that good attorneys are never quite sure... they're always weighing conflicting positions. Because in the end the law is whatever the TTs -- or the judge if you fight -- say it is. And they're people not machines.

[gman]

As crazy as this sounds - many judges refer to Webster's Dictionary for definitions in their court opinions.

in·come
Pronunciation: \ˈin-ˌkəm also ˈin-kəm or ˈiŋ-kəm\
Function: noun
Date: 14th century
1
: a coming in : entrance, influx <fluctuations in the nutrient income of a body of water>
2
: a gain or recurrent benefit usually measured in money that derives from capital or labor; also : the amount of such gain received in a period of time <has an income of $30,000 a year>

Why is this important?

Note the items above in bold.

Just because someone receives CASH does not mean they have generated INCOME.

This is why the sale of coins is not INCOME. Only the GAIN would be considered INCOME.

In addition - INCOME is derived from CAPITAL or LABOR.

PROPERTY (ASSETS) are not INCOME. Only a GAIN on PROPERTY or a payment for LABOR is INCOME.

So - the more I have thought about it - my PROPERTY SETTLEMENT is an ASSET - not INCOME. It is no different than having given someone a $5,000 bill and receiving change in the amount of $100/week for 50 weeks. The $5,000 is not a GAIN nor was it derived from my CAPITAL (think investment) or my LABOR.

I am proceeding as such on my Means Test. If they choose to fight it, I will then claim it is not PROPERTY and I can use my exemption elsewhere. I cannot see for the life of me that it can be ruled as BOTH property AND income. It must be one or the other.

As they say - if it walks like a duck.....

[ccsjoe]

As crazy as this sounds - many judges refer to Webster's Dictionary for definitions in their court opinions.

in·come
Pronunciation: \ˈin-ˌkəm also ˈin-kəm or ˈiŋ-kəm\
Function: noun
Date: 14th century
1
: a coming in : entrance, influx <fluctuations in the nutrient income of a body of water>
2
: a gain or recurrent benefit usually measured in money that derives from capital or labor; also : the amount of such gain received in a period of time <has an income of $30,000 a year>

Why is this important?

Note the items above in bold.

Just because someone receives CASH does not mean they have generated INCOME.

This is why the sale of coins is not INCOME. Only the GAIN would be considered INCOME.

In addition - INCOME is derived from CAPITAL or LABOR.

PROPERTY (ASSETS) are not INCOME. Only a GAIN on PROPERTY or a payment for LABOR is INCOME.

So - the more I have thought about it - my PROPERTY SETTLEMENT is an ASSET - not INCOME. It is no different than having given someone a $5,000 bill and receiving change in the amount of $100/week for 50 weeks. The $5,000 is not a GAIN nor was it derived from my CAPITAL (think investment) or my LABOR.

I am proceeding as such on my Means Test. If they choose to fight it, I will then claim it is not PROPERTY and I can use my exemption elsewhere. I cannot see for the life of me that it can be ruled as BOTH property AND income. It must be one or the other.

As they say - if it walks like a duck.....

Gman, I think you got it right and it matches what my attorney did with my situation. It is an asset, and thus, exempted as such.

[keptdigging]

Good logic. As much as the statute looks for the broadest possible category of income, it does indeed say "income" not "cash received". If all else fails, read the law! And words have to mean something.

And remember it's the job of the TTs and the UST to push the law as far as they can. That doesn't mean you lose if you stand up to them. Also a good legal basis may make them cave because they don't want a case in front of a judge making precedent unless they're confident they'll win.