Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.


Author: Craig Andresen, Minneapolis, MN, Bankruptcy Attorney

01 Dec Means Test: Don’t Give Up, Even If You Think You’ve Flunked It, Part 5

If your bankruptcy lawyer tells you there is a problem with your "means test," known as Form B22, make sure the correct amount has been claimed for your vehicle ownership allowance. This is a dollar figure from the IRS National Standards which attempts to estimate the average amount a person should be spending on car payments or lease payments each month (or spending on acquiring a vehicle somehow). The standard amount is $471.00 per month for the first vehicle in the household and $332.00 for the second vehicle (these amounts are scheduled to be recalculated effective January 1, 2008). The law says you are allowed an expense consisting of the standard amount, or the average car payment due over the next sixty months, whichever is greater. Assume your car payment is $500.00 per month and you have sixty months left on the loan. The average monthly payment over the next sixty months is $500.00, so you are allowed $500.00 as an expense. Assume, however, you only have thirty months left on the car loan; now the average payment due over the next sixty months is $250.00; therefore you are allowed an expense of $471.00 per month. This is because you get either the standard amount or the sixty-month average payment, whichever is greater.
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25 Nov Means Test: Don’t Give Up, Even If You Think You’ve Flunked It, Part 4

This is the fourth article in a series covering "means test" issues. By now, you're probably aware that consumers are required to file Form B22 (the means test form) with their bankruptcy papers. Form B22 establishes whether you are eligible to file chapter 7, and sometimes dictates the level of repayment in a chapter 13 plan. Obviously, then, you don't want mistakes to creep into your entries contained in the various parts of Form B22, especially by failing to claim all the expenses you are entitled to claim. One important, but sometimes confusing, part of Form B22 is the line entry for your housing expense. This is usually a large part of your budget, so getting the answer right is important. For renters, Form B22 instructs you to use the IRS Local Standard rental expense for a household of your size, for the county you live in, no matter how much your monthly rental payment really is. If your rent is less than the standard amount, you get the higher amount from the standards; if your rent is higher than the standard amount, you get the lower amount from the standards. Not fair, you say? Correct; the means test is not concerned with fairness. The means test is a mathematical test applied rigidly to persons without any regard to fairness, not unlike the income tax tables, which also are applied rigidly to persons without regard to whether thay happen to have the funds available to pay.
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23 Nov Means Test: Don’t Give Up, Even If You Think You’ve Flunked It, Part 3

If you're a consumer thinking about filing bankruptcy, you probably know about the "means test," or Form B22, which must be filed with your case. The means test looks at your monthly household income and expenses, using prescribed formulas in an effort to see if you should be required to file a chapter 13 repayment bankruptcy, instead of chapter 7, or establishing your payment level in a chapter 13 plan. In Parts 1 and 2, we looked at how your monthly income is arrived at for use on Form B22. In Part 3, we will begin looking at the formula for your expenses. The subject of this article will be your ongoing monthly income withholding taxes. Due to the ambiguous wording used on Form B22 for the category of withholding taxes, lawyers use different ways of calculating this important number, possibly reaching different results for similarly-situated clients. It's easy to see why: Form B22 instructs you to fill in the average monthly amount of income withholding taxes you "actually incur." The use of the present tense verb "incur" is troubling, because the income figure used on Form B22 was incurred in the past six months. Does Form B22 really ask for your past income, and then ask for your present level of taxes you incur now? Literally speaking, that appears to be so. Is your head hurting yet?
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21 Nov Means Test: Don’t Give Up, Even If You Think You’ve Flunked It, Part 2

If you are considering filing bankruptcy, you should know that the "means test" created by the 2005 Bankruptcy Reform Act can actually be understood by both your lawyer and you --and understanding the means test is the first step toward "passing" it. In Part 1 of this series, we looked at how the means test uses a six-month average of your income to arrive at your current monthly income, which is the basis of the means test. Part 2 will look at households with more than one income source. This can include married couples, those who live with their partners, gay couples, or unrelated roommates. When is the other person's income counted? "Income" is defined in the bankruptcy law as all income received by the debtor in the six month reporting period, plus any other money paid on a regular basis toward the household expenses of the debtor or his dependents (11 U.S.C. section 101(10A)). This means that if a married couple files a joint bankruptcy case, their income consists of both spouses' income. This seems simple enough, so far.
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17 Nov Means Test: Don’t Give Up, Even If You Think You’ve Flunked It, Part 1

If your bankruptcy lawyer has told you about the "means test" contained in the new bankruptcy law, hopefully she has also told you that you have "passed" this test. But what if your lawyer has told that you are "flunking" the means test? You need to understand why she would come to this grim-sounding conclusion, and what you can do about it. Maybe you can help fix this problem -- after all, the means test involves financial information you gave your lawyer, information about your income, paycheck deductions, and household expenses. You know these facts better than your lawyer does -- remember, she went to law school, she studied the bankruptcy law inside and out, she is the expert on the means test rules, but she has never studied your financial information before! You are the source of this new information your lawyer is using to complete your means test. You are the only one who is equipped to make sure the information is being interpreted correctly. Here's Part 1 of how you do it.
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10 Nov Chapter 13: What If My Case Just Got Dismissed?

If your chapter 13 case was recently dismissed, is the situation truly hopeless? What if the chapter 13 was filed to catch up on past due house payments, or to avoid repossession of a much-needed automobile, or to stop a wage garnishment by the IRS? In these situations, the chapter 13 was probably a godsend; its dismissal is a financial calamity. What can the debtor do? One idea is to pay your lawyer to petition the bankruptcy court to reinstate the case, based on the legal standard of "excusable neglect" by the debtor. This might take only a few hours of attorney time. If you can explain how the problem which resulted in dismissal of your case was due to excusable reasons, this could be the simplest remedy.
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