In a Chapter 13 bankruptcy case, you formulate a repayment plan for your debts using your income in order to pay some or all that you owe to creditors over a three to five year period. The length of the plan, of course, depends on how large your income compared to your debts. This repayment plan details how much you will pay and must be approved by the bankruptcy courts. The Chapter 13 means test shows a bankruptcy judge that your income is reliable enough to meet your obligations while still having enough money to cover basic living necessities.

Retirement Benefits in a Chapter 13 Repayment Plan

In deciding if your income is sufficient to repay all your debts within the prescribed time fame, the courts will allow you to use income from a variety of sources to make your plan payments and this includes retirement benefits. Additional income sources, other than real wages, that can be used to fund a Chapter 13 plan are pension payments, Social Security benefits, unemployment benefits, and alimony payments among others. Of course, commission, wages, and income from self-employment are additional ways that the courts will allow you to fund your Chapter 13 bankruptcy.

The bankruptcy code defines your current monthly income as all the money you have received in the past six months prior to your bankruptcy and then divides this number by six. If you are in a situation where you have multiple streams of income, you can sometimes omit certain income from your Chapter 13 bankruptcy such as social security benefits. In other states, social security payments can’t be used. If you are unsure of which types of income can and can’t be used in your state, seek the advice of an experienced bankruptcy attorney in Sacramento before filing for Chapter 13 bankruptcy. There are a number of advantages that Chapter 13 has over liquidation in Chapter 7, but they may not be the best solutions for your unique situation.