Teachers That Pass The Bankruptcy Means Test One Month, Might Fail The Next!
By Susanne Robicsek, North Carolina Bankruptcy Attorney on Sep 28, 2008 in General Bankruptcy Information, Means Testing, North Carolina
Another example of one of the absurd results of the Means Test is seen in the calculation of CMI for school teachers which can show that a teacher’s yearly income up to 33% higher than it really is.
In North Carolina, many school teachers are often paid for only 9 or 10 months of the year, but the bankruptcy means test doesn’t have any adjustments to calculate true income for people who aren’t paid the same amount every month. CMI (which stands for Current Monthly Income) will yield a different yearly income depending on the month that the bankruptcy case is filed.
Why the difference? Because the means test uses only half a year’s income to come up with a yearly income, and not everyone gets paid equally every month of the year. For example, a teacher who is paid $10,000.00 a year for 10 months (Sept - June) will show an average pay of $1.000.00 per month if the means test is run anytime between March and June.
Since the means test then takes that average monthly income but multiplies it by 12 to get a yearly amount to use in the means test, the results will show that the teacher makes $12,000.00 a year or 20% more than she really does.
If that 20% extra results in a presumption of abuse, then the teacher will have two choices: to wait until time passes and some/all of the months used to calculate the means test include the unpaid summer months, or to go to court to fight the presumption. Teachers who need to file for bankruptcy may not pass the means test in February, March, April, May or June, but they might if they file in other months.
For someone with a 9 month pay, it is even worse since the test can attribute up to 3 extra months of pay that are not earned or paid, which is 33% over what is really made!
If you are a teacher in financial trouble, you might want to see an experienced bankruptcy lawyer in your area soon before you fall into that period of time that will make it more difficult to file for bankruptcy.
by Susanne Robicsek, Charlotte NC bankruptcy lawyer
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