Means Test: Don’t Give Up, Even If You Think You’ve Flunked It, Part 11

10 Feb Means Test: Don’t Give Up, Even If You Think You’ve Flunked It, Part 11

Having an expense account means that money you spend in the course of your employment is returned to you by your employer. That’s a sensible business move that keeps an employee happy — usually. However, expense account reimbursements can create a problem for someone filing bankruptcy, because the U.S. Trustee considers such payments as being “income” for purposes of the means test. Having additional income of this nature can push you over the median income, resulting in the possibility of being forced into a questionable chapter 13 case, or resulting in a longer chapter 13 case, or a host of other problems. Fortunately, there is a simple solution to this problem.

Line 4 of Form B22A (the means test form for chapter 7), or Line 3 of Form B22C (the means test form for chapter 13), contains a line for inclusion of business income, and then for the subtraction from that income of any business expenses. The net result is then added to any other income you have received. The solution to the problem of expense account reimbursements is to use this business income and expense line to add expense account money you have received, and then subtract your out of pocket expenses which gave rise the the expense account income in the first place. This way, you avoid adding the expense account reimbursements to your income on Form B22, unless you actually came out ahead, in which case only your net “profit” is counted as income.

Because this line of Form B22 is labeled “income from the operation of a business, profession, or farm,” some may feel that it is misleading to use this line for expense account reimbursements. However, the common sense nature of this approach should appeal to parties on both sides of this issue. To avoid being accused of misusing the form, it would be wise to include a prominent note on Schedule I (the “actual income” portion of the bankruptcy forms) explaining that your expense account reimbursements have been included on Line 3 or 4 of Form B22, with the accompanying expenses subtracted as the form allows. This will mean that all parties to your case are on notice of your method of treating your expense account income on Form B22.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.
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