Means test and state median income questions

[fas917]

Hi,

I am little confused about means test. If I fall below state median income, do I still have to pass the means test. Thanks.

[tay666]

No.
You don't have to do the means test if you are below the median.

You should try and make sure that when you compair shedule I and J that they are pretty close.
If it looks like you have a lot of disposable income some trustees will push you into a chapter 13 even if you are below the median income.

[fas917]

Thank you.

[Hollyhomemaker]

Even though you are under your state's median, if you have $100 or more of disposable income you will be forced into a chapter 13 no matter what your income is. My income is $50k under my state's median, but even so, I cannot have $100 or more disposable or it's a chapter 13.

[yoyoma51]

If your income is under the state median, you can file for Ch. 7. You do not even need to take the means test.

The disposable income issue does not even arise. You ARE Chapter 7 eligible.

The BK law states this:

"If the debtor's "current monthly income" is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive."

To repeat:

If you income is BELOW THE STATE MEDIAN, YOU ARE CH. & ELIGIBLE.

If a trustee is trying to push you into Chapter 13 and you are below the median, you need the help of an experienced attorney to make sure it doesn't happen.

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless. Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

[jp2861]

If your income is under the state median, you can file for Ch. 7. You do not even need to take the means test.

The disposable income issue does not even arise. You ARE Chapter 7 eligible.

The BK law states this:

"If the debtor's "current monthly income" is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive."

To repeat:

If you income is BELOW THE STATE MEDIAN, YOU ARE CH. & ELIGIBLE.

If a trustee is trying to push you into Chapter 13 and you are below the median, you need the help of an experienced attorney to make sure it doesn't happen.

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless. Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

That is so not true! If what you say was correct there would be absolutely no need to fill out the income versus expense forms for a Chapter 7. All the means test does is decide abuse or not. After the means test is computed there still needs to be a determination of which Chapter to file. Do you really think if someone is under the median and has $500 dollars left each month that they will be allowed to file a Chapter 7 and not give any of that to the creditors? That would definitely be an abuse of the system. If you're under the median you don't need to continue on to the means test. But, which Chapter a person files will be determined by using disposable income.

[yoyoma51]

I stand corrected on the means test issue!

Thanks jp2861!

I found this link about the means test which may be very helpful to people.

http://www.new-bankruptcy-law-info.com/means_test.html

I do, however, stand by my comments about having an experienced lawyer!


PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless. Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

[HAP]

I'm confused. The below is a quote from the website of one of the attorneys (who is also a trustee) that I have an upcoming consultation with (I'm in NC).


To me it sounds like as long as we are under the median income for our state/county, then the means test does not apply.
What am I missing?

[yoyoma51]

The way I understand it, even if you fall below the median BUT you have disposable income (determined on the schedules you & your lawyer fill out), you may have to do Ch. 13.

The whole idea is if you can pay your bills on the income your have (even if it is below the median) you are abusing the system by trying to have your debts discharged.

Reading this link carefully (I had to read it six times before I started to get it) helps.

http://www.new-bankruptcy-law-info.com/means_test.html

This seems like it would be a quite rare occurrence, however.

And I still believe a good lawyer can help you make sure this doesn't happen.

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless. Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

[HAP]

I read over that a few times. What keeps throwing me for a loop is where it says the part about the calculation of subtracting all your monthly expenses except the debt you're trying to get discharged from your monthly income. Well, of course you'd end up being a lot better off without having to take out that debt from your monthly income, that's the whole reason you're trying to get that debt discharged

Hopefully once I meet with a couple of attorneys on the 2nd, it will make more sense to me.

Thanks again

[yoyoma51]

Yes, it is kind of crazy. When you meet with the attorney, I believe you'll be just fine if you are under the median.

I'll post a new thread in Ch. 7 asking if anyone was actually forced into 13 if the made less than the median.

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless. Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

[HAP]

Thanks, I'll keep my eye out for that thread.

[jp2861]

The easiest way to understand it is think of it as two seperate parts.

Part 1 determines if you qualify to file a bankruptcy. If you're under the median you qualify. If over the median and after figuring the means test you are below the limits, you qualify to file. All this does is verify that your filing is not an abuse of the system.

Part 2 will now determine whether you file a 7 or 13, based on how much disposable income you have (income versus expenses).

There's obviously alot of nuts and bolts holding all that together but that's a laymans version.

The easiest way for it to make sense is download the means test forms and fill them out for yourself. It will become alot clearer after doing that.

[newbeginning]

This is confusing. I've read on a number of law office websites that uncategorically state that if you fall below the median income in your state that you qualify for Ch.7. If not, then you must pass the disposable income test.

Hmmmmmm....

[FreshLikeADaisy]

jp2861 is correct. The original determination is made when you do Form 22, also known as the means test. If your income falls below the average (the "mean") for your area, you don't have to fill out the rest of it, because the presumption of abuse does not arise, and that's the box you check at the top of Form 1, your voluntary petition, and the way it is originally filed with the court.

But whether you have to fill out Form 22 in its entirety or not, EVERYONE has to do Form 6 (the schedules) INCLUDING Schedules I & J, a breakdown of income and expenses. So you can be under the median for your area (which is the basic eligibility for Ch7) and yet have the trustee determine that you have to go Ch13 based on your schedules I & J.

It also works the other way: you can be OVER the mean, and the presumption of abuse DOES arise, and still have a successful Ch7 because the actuality of your circumstances make it impossible for you to participate in a Ch13. It's just that it's a lot harder to do, you have to jump through more hoops and fill out more forms and be a lot more careful and exact how you break down and list your expenses, but yes it can be done, and it's not all that uncommon.

But in either case, whether you have a trustee that is pushing you into a 13, or a means test that seems to exclude you from a Ch7, you need an attorney that is able and willing to take you through it. I can't imagine going pro se in either scenario, and an attorney who just wants a complication-free straightforward bk isn't going to suffice, so you have to pick your attorney carefully.