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What Type Of Income Do I Need To Report In Bankruptcy?

Posted By admin || 18-Dec-2009

BankruptcyAll debtors filing bankruptcy are required to take a "means test" which will determine if they need to file Chapter 7 or Chapter 13 bankruptcy.  When taking the "means test" the debtor will be asked to disclose all of their income for the previous six months prior to filing bankruptcy.  It is important that the debtor answers the income questions honestly and accurately. Please avoid the temptation to justify hiding income or conveniently "forgetting" about that side job you held for a few weeks.  You will need to report all income or face possible dismissal of your bankruptcy case if it is discovered that you did not accurately report your income.  Let's review, what types of income should a debtor report?

All types of income in the previous six months before filing bankruptcy. Income earned from side jobs, even if those side jobs that were paid in cash, on a temporary basis or even if you failed to report them on your taxes. This could also include income earned from an investment such as a CD, business or shares of stock, rental income or money giving to you by a relative, such as an inheritance or trust fund.

For example:

  • If you have a side business selling used watches on eBay, you need to report that income on your "means test" when filing bankruptcy.
  • If you worked for two weeks as an extra in a movie production, three weeks before you filed bankruptcy, you still need to report that income. Even if that income was temporary (a fluke, lucky break etc.) and will significantly increase the income amount you earned during the prior six months.
  • If you were unemployed all year and then suddenly one day before a filing bankruptcy you won $60,000 in the lottery, you would need to report that income on your bankruptcy "means test."

It doesn't always make sense; but the "means test" requires that you report all income in the past six months prior to filing bankruptcy, even if that income was temporary. Work with your bankruptcy attorney if you need to seek bankruptcy protection, but have received temporary income that will significantly increase your income.

Categories: Bankruptcy
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