The “Means Test,” What Does It Mean?
A San Jose bankruptcy lawyer explains the means test...
The 2005 changes and amendments to Section 11 of the United States Code (U.S.C.), the Section that deals with bankruptcy, were designed to prevent alleged abuse of bankruptcy and to require that debtors pay for those debts which they knowingly incurred. The legislation made it much more difficult for the average American to file for, and eliminate, their debt. It appears that the legislators want to a make Chapter 7 bankruptcy discharge tougher to obtain and push debtors into a Chapter 13 repayment plan.
One of the major changes/additions in the 2005 legislation was creating the “means test.” This test is a two part test which takes into account the disposable income a debtor brings in after his/her living expenses are taken into account. Obviously, those who are deemed to have too much monthly excess income will not be allowed a Chapter 7 discharge and will be forced to either file under Chapter 13, or not file at all. Under the old laws, judges and trustees had more discretion in their decisions and could judge each case by its own unique circumstances.
A formula was devised which exempted “survival” expenses, such as food and mortgage, and looked at the excess income. Should said monthly income exceed twenty-five percent (25%) of their unsecured nonpriority debt (mainly credit and department store cards, medical bills, and personal loans), the debtor may not file for Chapter 7 bankruptcy. The second part of the test measures the debtor’s income to the state’s median income and if the debtor’s families combined gross income is greater than the median income for that state, the debtor may need to file for Chapter 13 bankruptcy.
If you have questions regarding Bankruptcy in San Jose please contact us at 408.279.2288 for a free consultation or visit www.bkanswers.com and we can connect you with one of our experienced San Jose Bankruptcy Attorneys. After you have spoken with one of our downtown San Jose bankruptcy attorneys, we can schedule you for a free face to face appointment in an office location nearest you. Our team of San Jose Bankruptcy Lawyers can assist you with all aspects of your bankruptcy or bankruptcy litigation case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, San Jose and the South Bay!
