Income “Derived” and “Received” for Means Test

28 Nov Income “Derived” and “Received” for Means Test

One of the many sticking points about the Means Test is defining income when comparing one’s income for the past six months against the median income. Income is defined in sec. 101(10A) of the Bankruptcy Code as “the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor’s spouse receive) without regard to whether such income is taxable income, derived during the 6-month period . . .”.

There has been much debate over the impact of “receives” and “derived.” Does a commission or pay check received after the six month period count? What if it is received during the six months but stems from work before the period began?

On November 20, 2008, Judge Joel B. Rosenthal of the Massachusetts bankruptcy court ruled that the income must be derived during the six month period, and that “the timing of its actual receipt is irrelevant.” This ruling is practical and easy to apply, although it may contrast with accepted rules of statutory construction which discourage ignoring words expressly included by Congress.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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