13 Oct Bankruptcy Means Test Gets Meaner
The bankruptcy means test gets meaner on November 1, 2010, when falling income guidelines go into effect. Consumers thinking of filing bankruptcy who may be close to the median income line should compare the BEFORE and AFTER figures. Filing bankruptcy by Halloween may be a good idea for some consumer debtors.
It is no surprise that in this down economy, with so many people without jobs or earning significantly less than in the past, that the American median family income is dropping. As the income drops, so do the guidelines for bankruptcy. Ironically, as one makes less money and has more financial problems, it becomes harder to qualify for chapter 7 bankruptcy.
The bankruptcy means test relies on the median family income by family size compiled by the U.S. Census Bureau. These figures are updated periodically. The U.S. Trustee Program announced the figures to be applied to bankruptcy cases filed on and after November 1, 2010, yesterday.
In Kansas, for example, median income dropped for one, two and four person households and increased $604 for three person households. The result will vary from state to state and household size to household size. On average, an estimated five per cent drop in income was anticipated in these new census figures.
The means test was created to determine one’s ability to pay her general unsecured creditors. Consumers with income below the median, generally, may file a chapter 7 or chapter 13 bankruptcy. Debtors with income above the median, must complete a long, complicated form detailing income and expenses, and may be required to file a chapter 13 payment plan.
This is not the first time income has dropped.
Here is a chart of the Census Bureau Median Family Income by Family Size for consumer bankruptcy cases filed on and after November 1, 2010:
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