On March 11, 2021, the American Rescue Plan Act was signed into law. Part of this law expended the existing child tax credit for tax year 2021.
Instead of applying up to $2,000 per qualified child, the amount was increased to $3,600 for a child under the age of 6 and $3,000 for a child aged 6 – 17. In addition, a household would receive half of either $3,600 or $3,600 in direct monthly payments between the months of July and December 2021.
So, let’s say you’re a household of 5 – you, your spouse and your three children ages 1, 3 and 8. Under this law, you’re set to receive an additional $5,100 over the next 6 months, and then the remaining $5,100 in tax credit when you file in 2022. But you’re thinking of filing a bankruptcy and you may know there are income limitations for households if you needed to file a chapter 7 bankruptcy. However, you don’t have to worry since the United States Trustees Office will not consider the additional income you’ve received under this plan as additional income when applying a means test calculation.
Let’s say you’re thinking of filing a chapter 13 bankruptcy or are already in a chapter 13 bankruptcy and you’re wondering if you have to report this income or if your planned payments are going to increase because of this additional income. Similar to the reason above, the United States Trustees Office doesn’t expect this additional income to be a factor in determining protected disposable income because its only limited to one year – 2021. You don’t have to factor this income when determining a budget or worry about your plan payments going up.
If you’re thinking of filing for bankruptcy, and or if you have questions or are ready to get your life back, reach out to Minnesota’s nicest bankruptcy law firm by going to www.lifebacklaw.com. You won’t regret it!