Ten Reasons to Delay Filing Bankruptcy! Reason No. 6.1: The Means Test
By Kevin Gipson, New Orleans Bankruptcy Attorney on Apr 30, 2009 in Bankruptcy Practice and Procedure, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy
When determining when to file for a bankruptcy, an issue to consider is whether a delay in filing can place the debtor within the current monthly income guidelines for his state.
Under the changes to the bankruptcy code that resulted from the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), a debtor who wants to file for a Chapter 7 bankruptcy must show that they do not have earnings that require them to be in a Chapter 13 bankruptcy.
The process of determining the debtor’s income for bankruptcy purposes is known as “The Means Test”.
The means test uses the income of the debtor for the six months leading up to the filing of the bankruptcy. This month period is referred to as the debtor’s “current monthly income”.
The problem with this test is that even if the debtor’s income has recently decreased, the use of the six months before the filing date may make the debtor’s income for bankruptcy purposes higher than it will actually be and place him into an income situation where he may be required to file a Chapter 13 bankruptcy.
In a case of a recent decrease in income or a job loss, it may be best to wait and allow the decrease in the income to be reflected in the current monthly income calculation.
Current Monthly Income is only one of many factors to consider in deciding whether to wait to file a bankruptcy.
The advise of an experienced bankruptcy attorney is recommended when deciding, whether to file for bankruptcy, when to file for bankruptcy and the type of bankruptcy to be filed.
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