SSDI is included in your median income for bankruptcy purposes

When you file for bankruptcy, the court calculates your median income — the middle point of what you earned over the past six months — to decide which chapter you can file under and what you owe. Social Security Disability Insurance (SSDI) counts as income in this calculation. The Social Security Administration reports it to you on a 1099-SSA form each January, and the bankruptcy trustee will see it when you file your petition.

This matters because median income determines whether you can file Chapter 7 (which may discharge unsecured debts like credit cards) or whether you must file Chapter 13 (a repayment plan). If your median income falls below your state's median income threshold, you pass the "means test" and Chapter 7 is available. If it exceeds the threshold, you either fail the means test or must show that your expenses are high enough to still may have access to for Chapter 7.

The bankruptcy court does not treat SSDI differently from wages. It is income, and it goes into the calculation the same way. However, the expenses you can deduct — including medical costs, disability-related work expenses, and certain other items — may offset some of that income when the trustee evaluates your ability to repay.

Key Takeaways

  • SSDI is counted as income on your bankruptcy petition and factors into your median income calculation for the means test.
  • Your median income is averaged over the six months before you file, so the trustee will look at your SSDI statements from that period.
  • If your median income (including SSDI) exceeds your state's threshold, you may still file Chapter 7 if your allowed expenses are high enough to pass the second part of the means test.
  • Supplemental Security Income (SSI) is treated differently than SSDI and may not count as income in the same way; consult your bankruptcy attorney about your specific situation.

How the six-month lookback period works with SSDI

The bankruptcy court looks at your income for the six calendar months before you file. If you receive SSDI, the trustee will request your Social Security statements or benefit verification letters covering that period. The amount you actually received — not the amount you were may have access to to receive — is what counts.

This can matter if your SSDI payment changed during those six months. For example, if you received a cost-of-living adjustment (COLA) in January, your January through June income will reflect the higher amount. If you were approved for SSDI partway through the lookback period, only the months you actually received payments count. The trustee calculates the average of those six months to determine your median income.

You report this income on Schedule I (your current income) and Schedule J (your current expenses) of the bankruptcy petition. Be precise: use the actual amounts from your benefit statements, not estimates. The Social Security Administration can provide a detailed earnings record if you need it.

When SSDI income pushes you over the median income threshold

Each state has a median income threshold based on household size. If your median income (including SSDI) exceeds that threshold, you do not automatically lose the right to file Chapter 7. Instead, you move to the second part of the means test: the disposable income calculation.

In this calculation, the trustee subtracts allowed expenses from your income. These expenses include housing, utilities, food, transportation, insurance, and certain other costs set by the Internal Revenue Service (IRS). If you have a disability, you may also deduct disability-related work expenses or medical costs that reduce your disposable income below the threshold. If your disposable income is low enough, you can still file Chapter 7 even though your gross income exceeded the state median.

This is where having documented medical expenses, mobility aids, or other disability-related costs can help. Keep receipts and statements for anything you spend money on because of your disability. Your bankruptcy attorney can help you determine which expenses the trustee will allow.

SSDI versus SSI in bankruptcy

Supplemental Security Income (SSI) is a different program from SSDI, and it may be treated differently in bankruptcy. SSI is a needs-based program for people with low income and limited resources. Some bankruptcy courts have held that SSI should not count as income because it is a needs-based benefit designed to keep you at a minimum living standard.

However, this is not settled law across all courts. Some trustees do count SSI as income. The safest approach is to discuss your specific situation with a bankruptcy attorney in your district. If you receive both SSDI and SSI, your attorney needs to know the breakdown of each so they can argue the correct treatment for your case.

The distinction matters because SSI is often the only income for people with severe disabilities and very low resources. If it is counted as income, it can artificially inflate your median income and push you into Chapter 13 even though you have almost no disposable income to repay creditors.

How work incentives and trial work periods affect your income calculation

If you are participating in an SSDI work incentive program — such as the Trial Work Period (TWP) or Extended may be able to access Period (EEP) — your wages from work count as income in bankruptcy, but your SSDI payment still counts too. You do not get to exclude either one. The bankruptcy trustee sees your total income: SSDI plus wages.

This is important if you are testing your ability to work. During the Trial Work Period, you can earn up to a certain amount per month (the amount changes yearly) without losing your SSDI benefits. However, all of that earned income, plus your full SSDI payment, goes into your median income calculation for bankruptcy purposes. If you are considering bankruptcy while working, factor in both sources of income when you talk to your attorney.

Similarly, if you are using a Plan to Achieve Self-Support (PASS) to set aside income for a work goal, the income you set aside still counts toward your bankruptcy median income. The PASS does not reduce your income for bankruptcy purposes — it only affects your SSDI benefit calculation.

What to bring to your bankruptcy attorney

Gather your Social Security benefit statements for the six months before you plan to file. You can request a detailed earnings record from ssa.gov or by calling 1-800-772-1213. Bring your most recent 1099-SSA form, which shows what Social Security reported to the IRS. If your SSDI payment changed during the lookback period, bring documentation of when the change occurred.

Also bring documentation of any disability-related expenses: medical bills, prescription costs, mobility equipment, home modifications, or transportation costs tied to your disability. Bring proof of your current living situation, utilities, food costs, and any other regular expenses. The more detailed your expense records, the better your attorney can argue for deductions that lower your disposable income.

If you receive both SSDI and SSI, bring statements showing the breakdown of each. If you are working or recently worked, bring pay stubs and a record of your earnings. Your attorney will use all of this to calculate your median income accurately and determine which chapter of bankruptcy is available to you.

Frequently Asked Questions

Will filing for bankruptcy affect my SSDI benefits?

No. Bankruptcy does not change your SSDI benefits or your may be able to access for them. SSDI is based on your work history and disability status, not on your assets or debts. The bankruptcy court cannot reduce or terminate your SSDI. However, if you own assets, the trustee may try to take them to pay creditors — so discuss what you own with your attorney before filing.

Does the trustee take my SSDI payments after I file?

No. SSDI payments are protected from creditors and from the bankruptcy trustee. Once the money is in your bank account, it becomes part of your estate, but most states exempt a certain amount of funds in a bank account if they are identifiable as SSDI. Keep SSDI deposits in a separate account if possible, and tell your attorney about any SSDI funds in your accounts so they can claim the exemption.

What if my SSDI is my only income and I still have too much to file Chapter 7?

This is rare but possible in high-cost-of-living areas or if you have very few allowed expenses. In that case, Chapter 13 may be your option. In Chapter 13, you propose a repayment plan based on your disposable income. If your disposable income is very low, your plan payment can be very low — sometimes as little as $0 per month if you have no disposable income. Discuss this with your attorney; Chapter 13 may still help you deal with debts even if Chapter 7 is not available.

Can I exclude SSDI from my income if I use it only for disability expenses?

No. The bankruptcy court counts all of your SSDI as income, regardless of what you spend it on. However, if you have high disability-related expenses, those count as deductions in the second part of the means test. The goal is to show that even though your income is high, your expenses are also high, leaving little disposable income to repay creditors.

What if my SSDI payment is garnished for child support or student loans?

SSDI can be garnished for unpaid child support or student loan debt in some circumstances. If your SSDI is being garnished, the amount you actually receive (after garnishment) is what counts as your income in bankruptcy. Bring documentation of the garnishment to your attorney so they can account for the correct amount in your median income calculation.