If you’re asking, “How do you calculate disposable income in Chapter 7 bankruptcy?” here’s the straightforward answer:

To calculate disposable income for Chapter 7 bankruptcy, subtract allowable expenses from your current monthly income and multiply the result by 60 to determine your five-year disposable income.

Disposable income is a critical factor in determining eligibility for Chapter 7 bankruptcy under the Means Test. At Morgan & Morgan, we’ve guided countless individuals in Georgia through the bankruptcy process, helping them accurately calculate disposable income and meet filing requirements. In this article, I’ll explain how to complete the Means Test and what you need to know about allowable expenses.

What Is Not Considered Disposable Income in Bankruptcies?

Essential expenses like housing, utilities, food, medical costs, child support, alimony, and Social Security benefits are not considered disposable income in bankruptcy calculations, as they are deemed necessary for basic living or legally protected.

The following expenses are typically excluded because they are deemed necessary for basic living or legally protected:

• Essential Living Expenses:
  Items such as rent or mortgage payments, utilities, food, transportation costs, and medical care are generally excluded from disposable income calculations.
• Court-Ordered Payments:
  Obligations like child support and alimony are not considered disposable income since they are legally required payments.
• Social Security Benefits:
  In most cases, Social Security income is exempt from being classified as disposable income under federal bankruptcy law.
• State-Specific Exclusions:
  Depending on Georgia law, certain other expenses, such as specific health insurance premiums or retirement contributions, may also be excluded.

Quick Tip: Carefully document all necessary expenses and provide accurate records to ensure these exclusions are appropriately applied.

 

 

Using Deductions During the Chapter 7 Bankruptcy Process in Georgia

When going over your numbers, your deductions will be taken into consideration as part of the process. You are going to use the actual cost for some of your expenses. In the computation, we will compare the national and state standards based on information received from the government. These expenditures are the priority and should be paid before any other financial obligations. The following paragraphs provide further explanation of some expense examples.

Food Expenses

This includes both the meals you consume at home and the food you eat when you go out. Take note that this does not contain any goods that are not related to eating. Your total for food costs will not reflect the prices of non-food items that you buy at the supermarket, such as cleaning supplies and personal care items, for example.

When you add up the cost of the meals you eat outside the home, you have to include the gratuities you give to the people who serve you. Delivered foods, such as pizza, fall under the category of “food outside the home.” Additionally included are visits to both quick-service and full-service restaurants.

 

Expenses Relating to Clothing

This category contains footwear as well as any other articles of apparel that you buy for yourself or your children. If you are skilled with a needle and thread and sew your own clothes, these costs are included as well. Additionally, you are required to disclose any services that pertain to your apparel, such as dry cleaning or laundry. You can also record the costs of repairs and any money you have incurred related to accessories and any repairs that they may require in this category.

 

Housekeeping Needs

This area of expenses includes things like postage, cleaning and laundry materials, lawn and garden supplies, and other things that are required around the house in order for you to operate regularly. These are all things that are included in this category.

 

Personal Needs

The cost of your toiletries will fall under this category. This includes items such as shampoo, razors, and various other personal care supplies.

 

Miscellaneous Needs

As long as the requirements are met, this section should also address any additional needs that were not previously included. Things like ATM fees and the cost of materials for schools are examples of what might fall into this category.

 

Deductions From Actual Costs in Georgia

• Housing, in addition to utilities
• Expenses relating to travel
• Taxes
• Paycheck deductions made automatically
• Life insurance
• Payments implied by a judge’s order
• Childcare expenses
• The cost of healthcare

You need to have a conversation with your bankruptcy lawyer about these expenditures and deductions in greater detail. Verifying that your figures are accurate helps set you on the proper course toward achieving your financial goals.

 

Is SSI Included as Disposable Income for Bankruptcies?

Supplemental Security Income (SSI) is generally not included as disposable income in bankruptcy cases. While SSI must be reported as part of your total income, it is protected and excluded from disposable income calculations under federal law.

This protection applies across both Chapter 7 and Chapter 13 bankruptcies, ensuring that individuals reliant on SSI for basic living expenses can retain those funds. Here’s how it works:

• Chapter 7 Bankruptcy:
  SSI is exempt and cannot be seized or used to repay creditors during the liquidation process.
• Chapter 13 Bankruptcy:
  While SSI must be reported in your filing, it is excluded from the disposable income used to calculate your repayment plan.

Quick Tip: Always disclose SSI benefits in your bankruptcy forms, even though they are exempt, to avoid issues with your filing.

 

How to Determine Discharged Debt in Chapter 7 Bankruptcy

When determining whether or not you are eligible for Chapter 7, your income, spending, and income after deductions are all taken into consideration. The following is a list of debts that are routinely discharged when you apply for bankruptcy.

• Credit card debt
• Medical bills
• Loans to individuals and other forms of unsecured debt
• Unpaid utilities
• Telephone expenses
• Your own responsibility for obligations backed by collateral (this might include auto loans)
• Deficit amounts that remain following a foreclosure or a repossession
• Judgments from unpaid credit card debt, medical expenses, or other unsecured debt

 

 

How Can You Determine Your Eligibility for Chapter 7 Bankruptcy in Georgia?

To determine your eligibility for Chapter 7 bankruptcy in Georgia, you must complete the means test, which compares your income to the state median and calculates your disposable income after allowable expenses. If your income and expenses meet the criteria, you may qualify for Chapter 7 relief.

Determining your eligibility for Chapter 7 bankruptcy in Georgia can feel overwhelming. That’s why working with an experienced bankruptcy attorney is essential. A knowledgeable lawyer can guide you through the process, ensuring you meet all requirements and submit accurate documentation.

The means test is the primary tool for evaluating your eligibility. This test compares your income to Georgia’s median income and accounts for factors like family size and disposable income. Here’s how it works:

 

Step 1: Compare Your Income to Georgia’s Median Income

The first step in the means test is determining if your household income is below Georgia’s median income for your family size. To prepare, gather at least six months of income records, ensuring all sources are disclosed. Transparency is critical—omitting or misrepresenting income can lead to delays or even dismissal of your case.

• Income Documentation: Include pay stubs, freelance earnings, or other income sources. If your income has changed, such as a job loss or pay cut, document those changes for consideration.
• State Median Income: The Department of Justice provides updated median income figures, which your attorney will use to evaluate your case.

If your income is below the state median, you may immediately qualify for Chapter 7 bankruptcy. If your income exceeds the median, proceed to Step 2 for further evaluation.

 

Step 2: Calculate Disposable Income

In the second step, you’ll subtract allowable expenses from your monthly income to determine your disposable income. This step uses the same time frame as Step 1 and requires detailed documentation of expenses.

• Allowable Expenses: Include housing, medical costs, utilities, transportation, and other necessary living expenses.
• Double-Check for Accuracy: Carefully review your expense list to avoid errors that could delay your filing. Missing or inaccurate information may require corrections or even restart the process.

Once expenses are deducted, the remaining amount is your disposable income. If this amount falls below the threshold for your household size, you may qualify for Chapter 7 bankruptcy. Your attorney will ensure all calculations are accurate and align with bankruptcy court requirements.

 

Why Accuracy Matters

Providing complete and accurate documentation is critical. Incomplete records or errors can cause delays or raise red flags in your case. Be transparent with your attorney about all financial details—they can only help if they have the full picture.

By completing the means test accurately, you increase your chances of qualifying for Chapter 7 bankruptcy and starting your path to financial relief.

 

Take the First Step Toward Financial Freedom

If you’re considering Chapter 7 bankruptcy in Georgia, don’t face the process alone. At Morgan & Morgan, our experienced team is here to guide you through every step, ensuring accuracy and maximizing your chances of success. Call us today at 706-548-7070 or fill out our online contact form to schedule a free consultation. Let us help you achieve the fresh financial start you deserve.

 

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How Long Does Bankruptcy Chapter 7 Last?