When filing bankruptcy there are three different types of income and expenses that are required to be reported on a bankruptcy petition. It doesn't matter whether you're filing chapter 7 or Chapter 13 bankruptcy, both require the same information. The three types of income that are required are actual income, projected income, and current monthly income or CMI. Prior to the changes to the bankruptcy code in 2005 debtors were only required to produce proof of actual and projected income. These types of income were what the Bankruptcy courts have used to determine whether or not someone was capable of paying back some or all of their debts.
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When the bankruptcy code changed in 2005 there was the addition of current monthly income or CMI. Congress felt that the other incomes didn't tell the true picture of the person filing for bankruptcy. So what was added for those filing bankruptcy was something called the means test. The means test will determine the debtor's CMI.
In a Chapter 7 or Chapter 13 bankruptcy filers are required to show their actual gross income from every source two years prior to the bankruptcy filing. This includes, all income from work or a business, income gains from investments, rental property income and so on. Also included in this category is any sale or transfer of property. Actual income is any money that a person got, no matter how. Most people filing bankruptcy don't realize it but non-taxable income, sale of any assets, a gift, an inheritance, disability, child support, alimony, a court settlement or any other source of money that is given to the debtor counts as income. After reading that list it just covers about anyway a person has to come upon some money. When reviewing a person's actual income from the last two years the trustee will be able to see fluctuations in the income that might have caused the reason for the individual filing bankruptcy.
The debtor filing bankruptcy needs to also disclose their projected income. The projected income is the current or future income. Of course, the debtor doesn't need to go see a psychic to see what their future income is, but this projection is an amount of income that the debtor reasonably believes that they will receive in the future. If the debtor is unemployed, with the way the current job market is, it would be safe to say that their projected income will probably be zero, unless they are getting unemployment.
Lastly, the final type of income required to show in a bankruptcy is CMI. Current monthly income is figured out by the debtor taking the means test. Basically, the means test is the household income received in the past six months, multiplied by two, prior to filing bankruptcy is greater than the states median annual income you might not qualify to file Chapter 7 bankruptcy. That doesn't mean that you absolutely don't qualify because there are many individuals filing bankruptcy that make more than the median income. The part that gets confusing is the complicated income over expenses, it's also a big part of the equation. This is one reason that a bankruptcy attorney could be an asset for an individual filing bankruptcy. Using the state median income tables will give people a rough idea if they qualify for Chapter 7 bankruptcy. If they're on the line or above it, doesn't necessarily mean they don't qualify, but they should consult a bankruptcy lawyer to find out what they can do.
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