Prior to the changes in the Bankruptcy Code in 2005, most individuals who could demonstrate to the court that their reasonable living expenses exceeded their income could file Chapter 7 bankruptcy. However, with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), debtors had to qualify to file Chapter 7 bankruptcy. Debtors must now demonstrate to the court that their income falls below the average median income based on averages of families within their jurisdiction in order to qualify to file Chapter 7 bankruptcy.
The Means Test
According to the Bankruptcy Code, every consumer debtor must file a means test. The means test is used to determine whether an individual’s
Chapter 7 case is presumed to be an abuse of the Bankruptcy Code. If a case is presumed to be an abuse, the court may require that the debtor’s case be dismissed or converted to a Chapter 13 case.
In order to determine if a case falls under the category of abuse, each debtor must complete the means test. The means test uses the debtor gross income from the past six months to arrive at an average monthly income. That figure is annualized and compared to the average monthly income for a family of the same size in the same jurisdiction. If the debtor’s income exceeds the allowable income, the debtor may then deduct allowed expenses to determine net disposable income. Some expenses will be fixed by data provided by the Census Bureau and the Internal Revenue Service while other expenses are provided by the debtor.
If the debtor’s disposable income still exceeds the allowed amount for a family of that size, the debtor does not qualify to file Chapter 7 bankruptcy according to the means test. While there are some exceptions and debtors can challenge these figures, in most cases, if a debtor files Chapter 7 bankruptcy with income that exceeds the allowed income based on the means test, the bankruptcy case will be dismissed unless the debtor converts the Chapter 7 case to a Chapter 13 case.
The means test can be complex and difficult to understand; therefore, you need an experienced bankruptcy attorney who understands the means test and also knows how to maximize your allowed expenses within the Bankruptcy code. Travis J. Richards has extensive experience with assisting debtors who are borderline on the means test.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
If you are experiencing financial problems due to debt, contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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