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Do You Qualify For Bankruptcy? How Does The Means Test Affect Me?
One of the main changes to the bankruptcy code created in 2005 by the Bankruptcy Prevention and Consumer Protection Act (BPCPA) is the determination as to whether a debtor qualifies for filing a Chapter 7 bankruptcy. This is basically achieved by examining the income received by the debtor during the six-month period preceding the filing of the bankruptcy and, if necessary, considering certain allowable expense deductions. (This process is not required for individuals whose debt is primarily business debt rather than consumer debt.)
The Means Test
If the debtor’s income for the six months leading up to the filing of the bankruptcy petition is below the state median for that particular household size, then the debtor may file a Chapter 7 bankruptcy. If, on the other hand, the income is over the median amount, additional calculations, referred to as the Means Test, must be performed.
These calculations take into consideration various allowable deductions, such as secured debt payments (mortgage, car loans), child support obligations, retirement contributions and living expenses. A debtor who was over the median income but then passes the means test (also referred to as the disposable income test) would still be eligible to file a Chapter 7 bankruptcy, whereas a debtor who does not pass the means test must file a Chapter 13 bankruptcy.
In a Chapter 13 bankruptcy, monthly payments are made each month (as determined by the disposable income resulting from the means test) to the Chapter 13 trustee as payment towards some of the debtor’s liabilities.
Filing For Bankruptcy More Complicated
Contrary to what many may believe, the changes to the bankruptcy laws did not take away the option of filing for bankruptcy in general or for filing a Chapter 7 bankruptcy in particular. The bankruptcy means test, however, has created a more involved and complex procedure which does have an impact on the type of bankruptcy that can be filed and the amount of the monthly payments that must be made if the debtor is filing a Chapter 13 bankruptcy.
As such, it is now more important than ever to have an attorney who is experienced in all of the details of the bankruptcy laws and rules. The attorney at the Law Offices of Ira C. Yellin, LLC, has been assisting clients in obtaining bankruptcy relief for over 20 years and is skilled in performing the means test in a way that best benefits a debtor filing for bankruptcy.
Contact A Bankruptcy Means Test Attorney For A Free Consultation
For more information or to schedule a free initial consultation with an experienced bankruptcy lawyer, please contact the Law Offices of Ira C. Yellin, LLC, today.
When representing consumer debtors in connection with bankruptcy, the Law Offices of Ira C. Yellin, LLC, is a debt relief agency as defined by the Bankruptcy Code, 11 USC § 101(12A).