The exclusion of Social Security from the means test is one of the most important provisions in the Bankruptcy Code for retirees and disabled individuals.
The Legal Basis
Section 101(10A) of the Bankruptcy Code defines "current monthly income" and specifically excludes "benefits received under the Social Security Act." This exclusion was added by the 2005 BAPCPA amendments and applies to all forms of Social Security benefits.
What Is Excluded
- Social Security retirement benefits
- Social Security Disability Insurance (SSDI)
- Supplemental Security Income (SSI)
- Survivor benefits
- Dependent benefits
Practical Impact
For someone living primarily on Social Security, this exclusion is a game-changer. A retiree receiving $3,000/month in Social Security -- which would be $36,000/year -- could have zero "income" for means test purposes. They would automatically pass Part 1 and qualify for Chapter 7.
Mixed Income Situations
If you receive Social Security plus other income (pension, part-time work, rental income), only the non-Social Security income counts for the means test. This often pushes filers well below the median, even if their total actual income is above it.
This provision is particularly important for seniors facing medical debt or credit card debt accumulated during retirement. The combination of Social Security exclusion and the typically lower income of retirees means most seniors readily qualify for Chapter 7.