Monthly Archives: January 2017

Do my VA benefits count as income on the bankruptcy means test (form 22 or 122A)?

Yes they do (most of the time).

When you file bankruptcy, we run your income on a “current monthly income and means test” form called Form 122A (in the old days just “Form 22”).  If you make too much money, you cannot file a simple chapter 7, and you are stuck in a chapter 13 on a repayment plan to your creditors.  

When we run the calculations, we count W2 income, alimony, pension, and a host of other types of income.  However, we don’t count some government benefits, like SSA.  Just today, I had another bankruptcy attorney call me today and ask if he had to count his client’s VA benefits on the analysis, and the answer is a resounding, “YES!”

That being said, we don’t count VA Disability Income if you are

a disabled veteran as defined in 38 U.S.C. § 3741(1)) whose indebtedness occurred primarily during a period in which I was on active duty (as defined in 10 U.S.C. § 101(d)(1)) or while I was performing a homeland defense activity (as defined in 32 U.S.C. §901(1)).

See “Statement of Exemption from Presumption of Abuse.”  So, if you incurred the debts while on active duty and are now disabled, then we don’t have to count the VA Disability Income.

I need to give credit where credit is due.  I did a little research, and out of 5 articles I read, this one gave me the best starting point:  My thanks to Richard M. Dwornik at Dwornik law.

What happens to my 2016 tax refund when I file bankruptcy?

You lose it unless you’ve already spent it.

Simply put:  If you file bankruptcy before you receive and spend your tax refund, you will lose the entire thing to the bankruptcy trustee.  

It’s that time of year again where I have to answer the phone and tell people that I don’t want their money until February or later because of tax refund season.  It makes a lean December/January in our household, but it’s the only way to protect my clients.

(I am cutting and pasting from earlier posts, so please forgive the repeat information).

So let’s say you get your refund February 1, 2016.   What do you do?

Better said, what don’t you do:

1.  Don’t go buy a new toy like a dirt bike or a tv.

2.  Don’t pay off any friends or family.  This is a preferential transfer, to an insider no less, and it results in Mom and Dad being sued by the trustee.

So what do you do:

1.  Spend it on exempt items under Utah Law.  This basically means food, clothing, washer, dryer, fridge, freezer, stove.

(Did you see a computer on the list?  No.   Don’t ask me if that’s okay.  It’s not).

2.  And use the rest to pay me.  :)

So let’s say you spend the tax refund on food storage March 1st and keep all of your receipts.  When can you file?  March 2nd.

Here is a relevant portion of the

Utah Exemptions Act, Utah Code Title 78B Chapter 5, Section 505

An individual is entitlted to an exemption in …

(viii) (A) one:

(I) clothes washer and dryer;

(II) refrigerator;

(III) freezer;

(IV) stove;

(V) microwave oven; and

(VI) sewing machine;

(B) all carpets in use;

(C) provisions sufficient for 12 months actually provided for individual or family use;

(D) all wearing apparel of every individual and dependent, not including jewelry or furs; and

(E) all beds and bedding for every individual or dependent;

There are other items you can spend the money on, and this is by no means comprehensive, but this should give you a good idea on how to spend it.  If you have questions on what to use it for, ask your attorney;  that’s what he’s there for.

Here are some helpful prior posts:

How do I spend my 2015 tax refund before filing bankruptcy?

Can I use my tax refund to pay for bankruptcy?

Is there a chance that a creditor will garnish/levy my tax refund?


Should I file bankruptcy now to stop the garnishment, or wait for my tax refund?


Is there a chance that a creditor will garnish/levy my tax refund?