The first step of the Means Test is to compute the average monthly income for debtor and live-in spouse for the past six full months before a bankruptcy filing and see if that is greater than the median income for the debtor’s household size. Such income is defined as excluding benefits received under the Social Security Act. Unemployment benefits are received under the Act but are not direct Social Security benefits, so the official form designers “punted” and allowed the debtor or counsel to disclose it as Social Security or non-Social Security income.
A recent Massachusetts bankruptcy decision ruled that unemployment benefits are Social Security benefits and therefore not countable income. In re Munger. 370 B.R. 21 (Bankr D MA 2007) (Rosenthal, J). This decision has widespread implications, since foster care, day care, and adoption subsidies as well as most forms of welfare (but not Food Stamps) are similar benefits under the Social Security Act (although most recipients might not have to worry about having above-median income).
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