Chicago Bankruptcy Question: Do I have to include all of my income in my Chapter 7?

Chicago Bankruptcy Question of the Day: Do I have to include all of my income in my Chapter 7 bankruptcy filing?  As is often the answer to questions such as these, the short answer is yes, all income must be properly scheduled and disclosed.  When you file for Chapter 7 bankruptcy protection, you are basically telling the bankruptcy court that you currently do not have sufficient income to repay your creditors any reasonable amount in the immediate future.  To prove this to the bankruptcy court, you must schedule any and all income, both within your budget and on the Statement of Current Monthly Income (means test), which are two very different standards.

The Statement of Current Monthly Income, commonly known as the "means test", requires disclosure of all income in the household for the six months immediately preceding the Chapter 7 bankruptcy filing.  Each source of income is separately scheduled.  The purpose of the means test is to determine at the most basic level whether or not you are eligible to file for Chapter 7 bankruptcy protection by comparing your household income to a median income standard set by the U.S. Census Bureau.  To this extent, several sources of income are not part of this calculation including, but not limited to, Social Security Income and disability income.  You must be found eligible under the means test, or have a significant recent change in circumstances that allows you to dispute the failure of the means test, in order to file for Chapter 7 protection.

Passing the means test, however, is not the end of the process.  You must also file with the court a complete budget as part of your bankruptcy petition.  The income side of this budget must reflect all income from all sources, including Social Security Income, rent assistance through Section 8 and public assistance, such as the Illinois Link program.  With all income disclosed, the budget continues and lists your monthly expenses, which will the subject of a future Chicago Bankruptcy Question of the Day.  In order to file for Chapter 7 bankruptcy protection, your budget must show that you do not have the ability to make any significant payment towards your debts (other than those you are keeping, such as a mortgage or car payment).

Failing to disclose income is a relatively common issue in Chapter 7 filings and it is a big problem.  Along with the scheduled income, you will have filed a list of expenses with the court.  If additional income is later discovered, it may be found by the court that you have the ability to repay a significant portion of your debts and the court may require that you then convert your case to a Chapter 13 bankruptcy or dismiss your case.  Additionally, if the court feels that you intentionally did not schedule a source of income, your case can be dismissed with prejudice, meaning that you are not allowed to file for bankruptcy protection again, and you could be criminally prosecuted for bankruptcy fraud.

All of the issues, except intentional fraud, can be easily dealt with by hiring a qualified and experienced Chicago bankruptcy attorney.  A good bankruptcy lawyer will know how to ensure that all income is properly scheduled, how to properly construct the means test and, if an issue may arise, be able to warn you of the issue in advance so that you are prepared for it.  The experienced Chicago bankruptcy lawyers at Ledford & Wu have years of practice drafting and filing Chapter 7 bankruptcy petitions and will effectively represent you throughout the bankruptcy process.  Contact us for a free consultation.

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