Is there a good time to file my bankruptcy case?
By David Leibowitz, Illinois and Wisconsin Bankruptcy Attorney on Mar 21, 2009 in Chapter 7 Bankruptcy, General Bankruptcy Information, Means Testing
A client recently visited my office seeking to file bankruptcy. Fortunately, he’s still working. Unfortunately, he just suffered a big pay cut. In fact, just last month, his income was reduced by $50,000/year. Even though he’s in severe financial difficulty, it’s not a good time for him to file a bankruptcy case under chapter 7. How come?
Although he is making less than the median income for a family his size now and would clearly qualify for chapter 7, his “current monthly income” – the average income he had in the past six months – reflects the income that he had when his salary was $50,000/year higher. At that level, he would not pass the means test. His “current monthly income” - which is not current at all – would be higher than the median income for family his size. At that level, he would be presumed to be abusing the system to file a chapter 7 and his case would be subject to a motion to dismiss.
So, this client will have to wait a few months until his “current monthly income” reflects his new reality.
Isn’t that silly? What was Congress thinking? Was Congress thinking? I don’t think so.
Lakelaw represents people and businesses in bankruptcy in Illinois and Wisconsin.
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