Why so much disagreement whether unemployment is included in income?

[trueblues]

I've seen varying opinions on whether unemployment benefits is included in income for the means test. I've read that its always incuded, that its exempt under the Social Security Act, that its a gray area open to determination by trustee/judge, etc.

I really need the UE money to which I'm entitled, but it would put us approx. $1,500 over the 6 month means test limit. I have an appt. with an attorney next week, but I'm reading that people get different answers from different lawyers and its frustrating. Does anyone have experience in this? (I'm in California).

[slam22]

I've seen varying opinions on whether unemployment benefits is included in income for the means test. I've read that its always incuded, that its exempt under the Social Security Act, that its a gray area open to determination by trustee/judge, etc.

I really need the UE money to which I'm entitled, but it would put us approx. $1,500 over the 6 month means test limit. I have an appt. with an attorney next week, but I'm reading that people get different answers from different lawyers and its frustrating. Does anyone have experience in this? (I'm in California).

It is included in calculations for the means test. No gray area here. For income tax purposes it is fully taxable for federal income tax(for 2008) but is 100% non taxable in California.

[momof3b1g]

Yes i believe since it is considered income it is indeed counted in the means test. In our case they also used it for our budget. Are you already receiving UE?

[AngelinaCatHub]

You have paid for unemployment by your rights. Every check you have gotten, a portion goes to this account. It is your money by your rights. That means, it is truly income as if a savings account for lost wages. However, the fact that you are getting unemployment to any sane person means that you lost your job and it is temporary. You will be alright even if a little over means. 'Hub

[trueblues]

Yes i believe since it is considered income it is indeed counted in the means test. In our case they also used it for our budget. Are you already receiving UE?

No, not receiving anything. I haven't applied yet because in CA, the timing of your application determines how much you get. For example, last year I earned more in the fourth quarter than in the other quarters, so the window for applying is April-June to get a slightly larger benefit amount.

Well, bummer. I'll ask the lawyers in my consultations, but I'll probably be better off letting it go than taking the risk of going over the median.

Thanks everyone for your replies.

[momof3b1g]

You have paid for unemployment by your rights. Every check you have gotten, a portion goes to this account. It is your money by your rights. That means, it is truly income as if a savings account for lost wages. However, the fact that you are getting unemployment to any sane person means that you lost your job and it is temporary. You will be alright even if a little over means. 'Hub

The employer pays into the UE account. Not the employees.

[Kingxray]

Check with a lawyer. IMO the entire BK process is a "gray area". We were over the median but passed the means test. Now the UST is giving us huge grief over allowable expenses and disallowable income. Our lawyer told us that there is the facts and figures of means test but then there is the "reality of life" and that the judge takes that into consideration. Again I would tell the lawyer your specific situation and see what they suggest. Good luck!

[Aaaaah!]

I don't this is as much of a slam dunk as some of you are suggesting. This, for example, suggests that in Massachusetts and Ohio, people have already argued (and won) the principle that unemployment compensation is not to be included in income for the purposes of bankruptcy:

http://mcleodlawoffices.com/2007/07/whats-income-and-whats-not/#more-210

[BnkrptcyLwyr]

Unemployment should *not* be included on the means test. There are several court cases saying it falls under the purview of the Social Security Act and is excluded.

I don't include it for my clients, and I have *NEVER* had a problem. (Knock on wood).

[momof3b1g]

In our case we included it. But we needed it. As we had to show we could afford our home etc. Would be nice to still be over median and be getting UE.
Do you not need that amount to live on? But in reality it is income. I don't see why you wouldn't include it. What do they consider it a gift?

[trueblues]

Unemployment should *not* be included on the means test. There are several court cases saying it falls under the purview of the Social Security Act and is excluded.

I don't include it for my clients, and I have *NEVER* had a problem. (Knock on wood).

I've now consulted with three lawyers (one was horrible so I won't even count her) and two said I could defnitely apply for Unemployment. (We're very close to the median without unemployment, so this was a major issue for me).

Here's what I found that would exempt it from gross income on the means test:

CALIFORNIA CODES
CODE OF CIVIL PROCEDURE

SECTION 703.140 (b)(1)

703.140. (a) In a case under Title 11 of the United States Code, all of the exemptions provided by this chapter, including the homestead exemption, other than the provisions of subdivision (b) are applicable regardless of whether there is a money judgment against the debtor or whether a money judgment is being enforced by execution sale or any other procedure, but the exemptions provided by subdivision (b) may be elected in lieu of all other exemptions provided by this chapter, as follows:

... (b) The following exemptions may be elected as provided in subdivision (a):

(10) The debtor's right to receive any of the following:

(A) A social security benefit, unemployment compensation, or a local public assistance benefit.

One lawyer told me to stop all cc payments immediately even though I've used a card within the past 30 days for a couple small, essential purchases and did a small cash advance in February. I wasn't comfortable with that advice. The other attorney said I should make "good faith" payments on those cards, as much as I can afford, for as long as I can. That sounds more reasonable and less likely to raise questions. Also, if I can get UE, I can make payments a while longer. I think I'll hire the second lawyer.

Thanks to all for your help.

[momof3b1g]

I've now consulted with three lawyers (one was horrible so I won't even count her) and two said I could defnitely apply for Unemployment. (We're very close to the median without unemployment, so this was a major issue for me).

Here's what I found that would exempt it from gross income on the means test:

CALIFORNIA CODES
CODE OF CIVIL PROCEDURE

SECTION 703.140 (b)(1)

703.140. (a) In a case under Title 11 of the United States Code, all of the exemptions provided by this chapter, including the homestead exemption, other than the provisions of subdivision (b) are applicable regardless of whether there is a money judgment against the debtor or whether a money judgment is being enforced by execution sale or any other procedure, but the exemptions provided by subdivision (b) may be elected in lieu of all other exemptions provided by this chapter, as follows:

... (b) The following exemptions may be elected as provided in subdivision (a):

(10) The debtor's right to receive any of the following:

(A) A social security benefit, unemployment compensation, or a local public assistance benefit.

One lawyer told me to stop all cc payments immediately even though I've used a card within the past 30 days for a couple small, essential purchases and did a small cash advance in February. I wasn't comfortable with that advice. The other attorney said I should make "good faith" payments on those cards, as much as I can afford, for as long as I can. That sounds more reasonable and less likely to raise questions. Also, if I can get UE, I can make payments a while longer. I think I'll hire the second lawyer.

Thanks to all for your help.

So do you have to use it for your budget, but not for the means test?
So any kind of assistance does not have to be used to figure the means test?

[trueblues]

So do you have to use it for your budget, but not for the means test?
So any kind of assistance does not have to be used to figure the means test?

I don't know about the budget, I haven't yet spoken to a lawyer about that. Most of my UE benefits will be used to make cc payments so I suppose that's acceptable.

I used the means test calculator at legalconsumer.com
Since I'm unemployed, I entered zero for Debtor Income and my husband's gross monthly income for Spouse Income (in Part 2). Then in section 9 it asks for unemployment compensation so I entered the amount I think I'll get. The calculator doesn't include the unemployment amount in Combined Total Income.

In section 10 it asks for all other types of income, but says not to include benefits received under the Social Security Act. I assume that means food stamps, public assistance, etc.