Caregiving Income and Expenses in a Bankruptcy Case

How does bankruptcy treat caregiving income and expenses?

Bankruptcy splits this into two separate questions, and they are answered on different forms.

First, income. Current monthly income is the average monthly income from all sources during the six full months before you file, and it includes any amount paid by another person or entity on a regular basis toward the household expenses of you or your dependents (11 U.S.C. § 101(10A); Bankr. E.D. La. official guidance — Chapter 7 Form Packet). So money a relative sends every month to help cover rent or groceries generally belongs on that form, even though it never appeared on a W-2.

Second, expenses. Caregiving costs are handled as deductions. On the Chapter 7 means test calculation, childcare such as babysitting, daycare, nursery, and preschool has its own line, and education required for a physically or mentally challenged dependent child has another (Bankr. E.D. La. official guidance — Chapter 7 Form Packet).

The two do not cancel each other out on the same line. Each is reported where the form directs.

• Income side: regular contributions from others toward household expenses count.
• Expense side: childcare and certain dependent costs are deductible lines.
• Chapter 13 uses parallel forms with the same structure (Official Forms 122C-1 and 122C-2).

What changes the answer in your situation?

Several details move this analysis, and they are worth sorting out before you fill anything in.

Whether the money is regular matters. The definition reaches amounts paid on a regular basis for household expenses (11 U.S.C. § 101(10A)). A one-time gift is a different fact pattern from a monthly transfer, and both are things to raise with a lawyer rather than guess at.

Whether the person is a dependent matters. The means test forms tell you to count the people you could claim as exemptions on your federal income tax return, plus any additional dependents you support, and they explicitly warn that this number may differ from the number of people in your household (Bankr. E.D. La. official guidance — Chapter 7 Form Packet; U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy).

Whether you are married and filing alone matters. A spouse living with you and not legally separated generally still has income reported in a second column (Bankr. E.D. La. official guidance — Chapter 7 Form Packet).

Age matters too: the out-of-pocket health care allowance is split between people under 65 and people 65 or older, because the older category carries a higher allowance.

• Regular contributions versus one-off help
• Who counts as a dependent you support
• Marital and filing status
• Ages of the people you support

What does federal law say about counting this income?

The governing definition is in 11 U.S.C. § 101(10A). Current monthly income is the average monthly income from all sources that the debtor receives, derived during the six-month period ending on the last day of the calendar month before filing, whether or not it is taxable. Court guidance summarizing that definition states plainly that it also includes any amount paid by any other person or entity on a regular basis for the household expenses of the debtor or the debtor's dependents, and that in a joint case it includes the spouse's income (U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?).

That same guidance notes that benefits received under the Social Security Act and certain other limited payments are excluded from the calculation.

The means test itself sits in 11 U.S.C. § 707(b)(2). It presumes abuse where current monthly income, reduced by the allowed deductions, and multiplied by 60, reaches the statutory thresholds. The deductions include the IRS National and Local Standards plus actual monthly expenses in the Other Necessary Expenses categories for the debtor, the dependents of the debtor, and the spouse in a joint case.

Where do state or local rules change this?

The income definition and the means test deductions are federal and apply the same way nationwide. What varies by state is what property you can protect, because 11 U.S.C. § 522(b)(3) points to the exemption law of the state where your domicile has been located for the 730 days before filing, with a lookback rule if you moved during that period. Some states allow the federal exemption list in 11 U.S.C. § 522(d) as an alternative; others do not.

Median income figures used in the means test are also published per state and household size, so the comparison point moves depending on where you live (Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals).

Local Standards for housing and transportation vary by area as well, since the statute directs you to the IRS standards for the area in which you reside (11 U.S.C. § 707(b)(2)).

We publish those state-specific figures on the state pages rather than repeating them here, because they change on their own schedule.

• Exemptions: set by your state of domicile under the 730-day rule
• Median income: published per state and household size
• IRS Local Standards: vary by geographic area

What does this look like in practice?

Consider someone supporting an elderly parent who lives with them. The parent receives Social Security and hands over a set amount each month toward groceries and utilities.

On the income side, a regular monthly contribution toward household expenses fits the § 101(10A) language, while Social Security benefits received by the debtor are described in court guidance as excluded from current monthly income. Those are two different questions about the same dollars, and how they interact is exactly the kind of issue to put in front of a lawyer rather than resolve from a form's plain text.

On the expense side, the parent may or may not be a dependent you support for purposes of the deduction count. The forms tell you to count people you could claim as exemptions on your federal return plus additional dependents you support, and to expect that number to differ from your household count.

A second common pattern is a single parent paying for full-time daycare. That cost is deductible on its own line, but the instruction is specific: do not include payments for elementary or secondary school education there.

• Regular contributions and excluded benefit types are separate questions
• Dependent count is a tax-style question, not a headcount
• Daycare and school tuition sit on different lines

What documents and information will you need?

The forms drive the paperwork, and 11 U.S.C. § 521 lists the debtor's duties. You are required to file a schedule of assets and liabilities, a schedule of current income and current expenditures, a statement of financial affairs, copies of all payment advices or other evidence of payment received from any employer within 60 days before filing, a statement of monthly net income showing how it is calculated, and a statement disclosing any reasonably anticipated increase in income or expenditures over the following 12 months.

That last item matters for caregivers. If a child ages out of daycare, or a parent's care needs are about to increase, that is a reasonably anticipated change.

For the caregiving pieces specifically, gather records that show the pattern rather than a single month.

• Six months of records for any money regularly received from another person
• Daycare, preschool, or care-provider invoices and payment records
• Any court order requiring support payments
• Evidence of out-of-pocket health care costs for people you support
• Pay stubs and other payment advices for the 60 days before filing (11 U.S.C. § 521)
• Notes on any expected change in income or expenses in the next 12 months

What should you ask a lawyer about this?

Caregiving arrangements are one of the areas where the forms leave real judgment calls, so a consultation is worth the time. Bring your actual numbers and ask direct questions.

The answers here also affect the shape of a case. Disposable income is described in court guidance as what is left from take-home pay after the basic necessities of life, including care for your dependents, and in Chapter 13 that figure drives what a plan must pay (U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter). Under 11 U.S.C. § 1322 a plan must provide for full payment of priority claims in deferred cash payments unless the holder agrees otherwise, and domestic support obligations sit at the top of the priority order under 11 U.S.C. § 507(a)(1).

Filing fees are a separate question from all of this. The Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)) plus a $78 administrative fee and a $15 trustee surcharge. Chapter 13 is $235 (28 U.S.C. § 1930(a)(1)(B)) plus the same $78 administrative fee.

• Does the money my relative sends count as current monthly income in my case?
• Who counts as a dependent I support for the deduction lines?
• How are benefits under the Social Security Act treated against a household contribution?
• Am I above or below the published median for my state and household size?
• How would my care costs be treated in a Chapter 13 plan?
• Do I have any domestic support obligations that would be priority claims?

Frequently asked questions

Does money my family gives me for bills count as income in bankruptcy?

Generally yes, if it is paid on a regular basis toward your household expenses. The definition of current monthly income in 11 U.S.C. § 101(10A) reaches amounts paid by another person or entity on a regular basis for the household expenses of the debtor or the debtor's dependents, whether or not the money is taxable. Irregular or one-time help is a different question worth raising with a lawyer.

How do I count household size on the means test?

The forms do not ask for your household size. They ask for the number of people who could be claimed as exemptions on your federal income tax return, plus any additional dependents whom you support, and they warn directly that this number may be different from the number of people in your household (Bankr. E.D. La. official guidance — Chapter 7 Form Packet).

Can I deduct daycare costs on the means test?

Childcare has its own deduction line. Form 122A-2 line 21 asks for the total monthly amount you pay for childcare, such as babysitting, daycare, nursery, and preschool, and instructs you not to include payments for elementary or secondary school education there (Bankr. E.D. La. official guidance — Chapter 7 Form Packet).

What about expenses for an elderly parent I care for?

It depends on whether that person is a dependent you support for purposes of the deduction count, which the forms frame as a tax-exemption question plus additional dependents. The out-of-pocket health care allowance is also split by age, with a higher allowance for people 65 or older (U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy). Ask a lawyer about your specific arrangement.

Does being above the median income end my options?

No. Income above the published median means you complete the second means test form rather than stopping at the first (Bankr. S.D. Iowa official guidance). That calculation then subtracts standardized and actual allowed expenses under 11 U.S.C. § 707(b)(2) to determine what, if anything, is available for unsecured creditors. Caregiving deductions are part of that subtraction.

Is Social Security counted in current monthly income?

Court guidance summarizing the definition states that benefits received under the Social Security Act and certain other limited payments are excluded from current monthly income (U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter). How that interacts with a household contribution from someone receiving those benefits is a fact-specific question for a lawyer.

What is the difference between the means test and Schedules I and J?

The means test uses a six-month historical average of income and mostly standardized expense figures. Schedules I and J ask you to estimate your monthly income and expenses as of the date you file (Bankr. N.D. Ill. official guidance — Chapter 7 - Additional Documents). A caregiver whose costs changed recently can look quite different on the two sets of forms.

What does bankruptcy cost to file?

The Chapter 7 filing fee is $245 under 28 U.S.C. § 1930(a)(1)(A), (f)(1), with a $78 administrative fee and a $15 trustee surcharge. Chapter 13 is $235 under 28 U.S.C. § 1930(a)(1)(B), with the same $78 administrative fee. The statute permits installment payment for an individual commencing a voluntary or joint case. Attorney fees are separate.

Sources

• 11 U.S.C. § 101 — Definitions · official source
• 11 U.S.C. § 707 — Dismissal of a case or conversion to a case under chapter 11 or 13 · official source
• 11 U.S.C. § 521 — Debtor's duties · official source
• 11 U.S.C. § 522 — Exemptions · official source
• 11 U.S.C. § 507 — Priorities · official source
• 11 U.S.C. § 1322 — Contents of plan · official source
• Bankr. E.D. La. official guidance — Chapter 7 Form Packet
• U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?
• U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy
• Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals
• Bankr. N.D. Ill. official guidance — Chapter 7 - Additional Documents
• 28 U.S.C. § 1930(a)(1)(A), (f)(1)
• 28 U.S.C. § 1930(a)(1)(B)
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9

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