11 Mar Business and the Means Test
Filing bankruptcy if you have a business can be different from a typical consumer case. First of all, if 51% of your debts were incurred for your business, you wonâ€™t have to file the means test! Thus, you avoid the problem of having too much income to qualify for a Chapter 7. Fortunately, it is not too difficult to determine which bills are business debts and which ones arenâ€™t. Just be sure you can defend that position with invoices or contracts should the need arrive.
If you donâ€™t qualify for the business debt exception, youâ€™ll have to list your gross monthly income on Form B22 â€“ the means test form. You do get to deduct the costs of operations and running the business. But where do you take the deduction? There is a difference of opinion in the judicial community.
Here in the 9th Circuit (California and the western states), you canâ€™t deduct those expenses until after the determination of your gross monthly income. You do get to deduct them later, but â€œbelow the line.â€
The â€œlineâ€ is the determination of monthly income. If it is above â€œmedianâ€ (determined on a state by state basis), then you may have to sign up for a five year plan. If itâ€™s below that figure, then you can qualify for a three year plan. Two less years of making the Chapter 13 payments! [Note that there is also a difference of opinion on whether or not you can do less than a five year plan if you are above median income but have little or no disposable income at the bottom of the form.]
All pretty complicated, and it varies greatly depending on where you live. Just one more good reason to contact a qualified bankruptcy attorney in your area.
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