SSDI Does Not Count as Income on the Chapter 7 Means Test

Social Security Disability Insurance (SSDI) payments are excluded from the income calculation on a Chapter 7 bankruptcy means test. The means test is the document the bankruptcy court uses to decide whether you earn too much to file Chapter 7. Because SSDI is a replacement for lost wages rather than current earned income, federal bankruptcy law treats it differently from wages, self-employment income, or other money sources.

This exclusion matters because it can be the difference between passing the means test and failing it. If SSDI is your only income or your largest income source, leaving it out of the calculation often means you will pass the test and remain may be able to access for Chapter 7 discharge. If you were counting SSDI as income, you might incorrectly believe you earn too much to file.

The rule applies to all SSDI payments, whether you receive them as a disabled worker, as a widow or widower on a deceased worker's record, or as a disabled adult child. Supplemental Security Income (SSI) is also excluded, though SSI is a different program with different rules outside bankruptcy.

Key Takeaways

  • SSDI payments do not appear on the Chapter 7 means test income calculation, so they cannot push you over the income threshold for your state.
  • The means test compares your household income to your state's median income; if you pass, you can file Chapter 7 without proving you cannot pay debts.
  • Other income sources—wages, rental income, interest, child support you receive—do count and must be listed on the means test form.
  • If you fail the means test because of other income, you may still file Chapter 13 instead, which lets you repay debts over three to five years.
  • Your bankruptcy attorney or the court's trustee can confirm which of your income sources count before you file.

What the Means Test Actually Measures

The Chapter 7 means test is a two-part calculation. The first part compares your average monthly household income for the six months before you file to your state's median income for a household your size. If your income is below the median, you pass the means test when ready and can file Chapter 7.

If your income is above the median, you move to the second part, which subtracts allowed expenses (housing, food, utilities, transportation, taxes) from your income. If what remains is below a certain threshold set by federal law, you still pass. If it is above the threshold, you fail the means test and must file Chapter 13 instead, or the court may dismiss your case.

SSDI exclusion happens in the first part of this calculation. When you list your income sources on the means test form (called Official Form 106Sum-1), you do not include SSDI. This means SSDI never enters the six-month average that gets compared to your state's median.

Which Income Sources Do Count on the Means Test

The means test includes wages from employment, self-employment income, rental or investment income, interest and dividends, child support or alimony you receive, unemployment benefits, workers' compensation, and pension income. It also includes income from a spouse if you are filing jointly, even if that spouse is not the one with the debt.

The form asks you to list income for each household member for the six months before you file. You calculate an average by adding six months of income and dividing by six. This average is what gets compared to your state's median.

Some income sources have special rules. For example, if you received a one-time payment like a tax refund or inheritance during those six months, you may not count it as ongoing income. Your bankruptcy attorney can help you determine what counts and what does not.

Why SSDI Is Treated Differently

SSDI is excluded because it is a federal insurance benefit based on a work history, not current income. When you receive SSDI, you are receiving a portion of what you would have earned if you had continued working. The law recognizes this distinction and does not penalize you for receiving a benefit you earned through prior work.

By contrast, wages are income you are currently earning, so they reflect your current ability to pay. The means test is designed to identify people who have enough current income to repay their debts, even if they have accumulated them. SSDI does not signal that you have current earning capacity; it signals the opposite.

This same logic applies to SSI, which is a needs-based program for people with disabilities, the elderly, and the blind. SSI is also excluded from the means test, though it is a different program with different may be able to access rules and payment amounts than SSDI.

How to Report SSDI on Your Bankruptcy Forms

You must still disclose SSDI on your bankruptcy petition and schedules, even though it does not count on the means test. On Official Form 106Sum-1 (the means test form itself), you leave SSDI out of the income section. On Official Form 106I (your income statement), you list SSDI separately and note that it is excluded from the means test calculation.

Your bankruptcy trustee and creditors will see that you receive SSDI. This information helps the trustee understand your financial situation and whether you have non-exempt assets they can liquidate to pay creditors. It does not affect whether you pass the means test, but it is part of the full picture of your finances.

If you are unsure how to report your SSDI on the forms, ask your bankruptcy attorney. Many attorneys offer a free initial consultation and can walk you through which forms require which information.

What Happens If You Fail the Means Test for Other Reasons

If your other income sources (wages, rental income, etc.) push you above your state's median or above the expense threshold in the second part of the means test, you cannot file Chapter 7. Instead, you have two options: file Chapter 13 bankruptcy or explore other debt relief options.

Chapter 13 is a repayment plan that lasts three to five years. You pay a portion of your debts through the plan while the rest may be discharged at the end. Chapter 13 has different income rules than Chapter 7—there is no means test, and you can file even if you have substantial income, as long as your income is below the Chapter 13 debt limit for your district.

If Chapter 13 is also not an option, you might consider credit counseling, debt settlement, or straightforward managing your debts outside bankruptcy. A bankruptcy attorney can review your situation and recommend the best path.

State Median Income and How It Affects Your Means Test

Your state's median income threshold changes every six months. The U.S. Trustee Program publishes new median income figures twice a year, usually in April and October. The median income for your state depends on your household size—a single person has a lower threshold than a family of four.

You can find your state's current median income on the U.S. Trustee Program website. When you file, the court uses the median income that was in effect on the date you file. If you are close to the threshold, timing your filing around a median income update could matter, though this is rare.

Because SSDI is excluded, it does not affect which threshold applies to you. Your household size still determines the threshold, but SSDI income does not increase the threshold or count toward it.

Frequently Asked Questions

If I receive both SSDI and wages, do I count only the wages on the means test?

Yes. You list the wages in the income section of the means test form and exclude the SSDI entirely. The six-month average of your wages is what gets compared to your state's median income. SSDI never enters the calculation.

Does my spouse's SSDI count if we file bankruptcy together?

No. If you and your spouse file jointly, both of your SSDI payments are excluded from the means test. Only income sources like wages, self-employment, and rental income count for both spouses combined.

What if I receive SSDI and also work part-time?

Your part-time wages count on the means test; your SSDI does not. You calculate the six-month average of your wages and compare it to your state's median. The SSDI is listed on your income statement but does not appear on the means test form.

Can the trustee take my SSDI payments after I file Chapter 7?

No. SSDI is protected from creditors and from the bankruptcy trustee. Even if you have non-exempt assets the trustee can liquidate, SSDI payments themselves cannot be seized. The trustee can only take assets you own, not ongoing income streams like SSDI.

If I fail the means test because of other income, can I wait and file later when my income is lower?

You can file Chapter 7 only once every eight years. If you fail the means test now, you could file Chapter 13 instead, or wait until your income drops below the median. However, waiting may not be practical if creditors are suing you or your wages are being garnished. Discuss timing with a bankruptcy attorney.