A line of credit is not income for the purpose of Medicaid eligibility.- Borrowed funds are specifically excluded from income for the purpose of Supplemental Security Income for the Aged, Blind, and Disabled.
- Under 42 USC § 1396a, “the single standard to be employed in determining income and resource eligibility for [Medicaid] . . . shall be no more restrictive than the methodology which would be employed under the supplemental security income program in the case of groups consisting of aged, blind, or disabled individuals.”
Federal Law Defines Countable Income for Medicaid Eligibility
Federal law states, “buying on credit is treated as though you were borrowing money and what you purchase this way is not income.” 20 CFR 416.1103. Therefore, a line of credit is not considered income for Supplemental Security Income, and cannot be considered income for the purpose of Medicaid eligibility.
A line of credit is not income because the funds received are borrowed money that the recipient is obligated to repay. In one published case, the United States Supreme Court found that loans are not income because one who receives a loan “incurs an obligation to repay that loan at some future date.” Commissioner v. Tufts, 461 U.S. 300, 307 (U.S. 1983). Similarly, the recipient of a line of credit is obligated to repay the lender the amount borrowed under the line of credit agreement. See Cameron v. Ewing, 424 N.J. Super. 396, 401 (N.J. Super. App. Div. 2012) (stating, “the recipient of a line of credit is indebted to the financial institution extending it.”). Therefore, a line of credit should not be considered income because the borrower is obligated to repay the lender.
A line of credit is more properly defined as a debt. The New Jersey Supreme Court defines “debt” as “that which one person is bound to pay another under any form obligation.” Under a line of credit agreement, the borrower incurs an obligation to repay the lender the amount that was borrowed.
To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Medicaid Attorney