Bankruptcy Means Test
The new bankruptcy laws passed in 2005 created some new bankruptcy forms that must now be included in a bankruptcy petition, including the Means Test in a Chapter 7 bankruptcy. The means test is supposed to tell the court whether or not you have enough available income left after paying your necessary living expenses to pay at least some amount to your creditors in order to settle your debts, rather than wiping them out. You are required to complete this paperwork as well as the other changes that were placed like the pre-bankruptcy credit counseling and post-bankruptcy personal financial management courses.
The bankruptcy means test consists of 57 questions about your income and expenses which are then compared to national and regional norms to determine if you make and spend more than most people in your area, as well as what your available income is or should be. If you are a disabled veteran or most of your debt is not consumer debt, you only have to complete a portion of the means test. The “presumption” is a nice way of saying whether or not you may be trying to abuse the bankruptcy system. If the presumption does arise at the end of the means test you may be pushed to file a Chapter 13 bankruptcy.
You will list your income on the second part of the means test. Once your income is figured out, it is measured against the average income of families the same size as yours in your area. If you have a higher income than the other families, you must continue filling out the means test, if it is less, then the presumption does not arise.
In part five you will deduct standard expenses for your family based on regional numbers the government has declared as acceptable for your area and family size, these include food, housing, automobile, utilities and other expenses.
The final part is determing how much money you have left over each month. If you have less than $6575 a year, the presumption does not arise, if you have more than $10,950, the presumption arises, and if you have somewhere inbetween $6576 and $10,949 you must continue with the means test form which compares the amount of unsecured, non-priority debt you have with your disposable income.
The bankruptcy means test is confusing, so conferring with a bankruptcy attorney is always a good choice before think about filing bankruptcy.
