Getting a new job before filing Chapter 7?

[ScaredGuy]

Hi guys im running a small business that's in a really tough place and it might need to be liquidated soon. There is a chance that i will need to file a personal chapter 7 bankruptcy. After working on this business for 11 years, i would really like to use that work experience as a boost for my resume with a potential new employer. I am thinking about trying to get a new job *before* the business is liquidated so that when the employer does their background research, they don't see a bunch of bad stuff about the business closing. however i am worried that if i get a new job that pays well, it might prevent me from filing personal chapter 7 bankruptcy due to the means test. for my state it says:

"If your total monthly income over the course of the next 60 months is less than $7,475 then you pass the means test and you may file a Chapter 7 bankruptcy. If it is over $12,475 then you fail the means test and don't have the option of filing Chapter 7. If your disposable income under the means test is between $7,475 and $12,475 then you must do further calculations to determine if you have the option of filing a Chapter 7 case."

so does this mean that i should try to get a job where i make a maximum of $7,000 per month or less just in case i need to file a personal chapter 7? this is all because i am worried that a potential new employer would not hire me if they saw that my business went bankrupt/got liquidated.

thank you for any thoughts on this matter

[justbroke]

Umm, that value is over 36-60 months ("total monthly income" = all income over that time period)! Few people making $7,000/month qualify for a Chapter 7 without having significant secured debt (home and cars) and a family.

The calculations for determining whether a Chapter 7 is an "abuse" under the code is complex. It is determined using something known as the means test. That test has certain allowances that are applied to your monthly income. That monthly income is then multiplied by your hypothetical Chapter 13 plan duration (e.g., 36 months or 60 months). That new number is evaluated under another special formula to see if you can provide a "meaningful" dividend to the unsecured creditors.

If your debt is primary nonconsumer debt (e.g., it's from the business), there is another exception to the means test. Where the debt is primarily nonconsumer, a debtor could still file a Chapter 7 as a noncomsumer bankruptcy. That is what I filed.

[ScaredGuy]

This is very confusing because then the same article says this: If your currently monthly household income is less than the Oregon median income for a household of your size there is a presumption that you pass the means test and are eligible to file a Chapter 7 bankruptcy. 1 Member Household - $44,779.00. Then another article says the median income for Oregon is $69,653 for a 1 member household. Guess I'll just have to verify with some attorneys on what the actual number is.

The "nonconsumer debt" also confuses me - does this mean debts for the business that I personally guaranteed, or *all* debts incurred by the business even if I did not personally guarantee them?

Umm, that value is over 36-60 months ("total monthly income" = all income over that time period)! Few people making $7,000/month qualify for a Chapter 7 without having significant secured debt (home and cars) and a family.

The calculations for determining whether a Chapter 7 is an "abuse" under the code is complex. It is determined using something known as the means test. That test has certain allowances that are applied to your monthly income. That monthly income is then multiplied by your hypothetical Chapter 13 plan duration (e.g., 36 months or 60 months). That new number is evaluated under another special formula to see if you can provide a "meaningful" dividend to the unsecured creditors.

If your debt is primary nonconsumer debt (e.g., it's from the business), there is another exception to the means test. Where the debt is primarily nonconsumer, a debtor could still file a Chapter 7 as a noncomsumer bankruptcy. That is what I filed.

[justbroke]

This is very confusing because then the same article says this: If your currently monthly household income is less than the Oregon median income for a household of your size there is a presumption that you pass the means test and are eligible to file a Chapter 7 bankruptcy. 1 Member Household - $44,779.00. Then another article says the median income for Oregon is $69,653 for a 1 member household. Guess I'll just have to verify with some attorneys on what the actual number is.

That's one of the problems with the internet. Information gets stale.

Always get your information from the source! https://www.justice.gov/ust/means-testing

As of today, 7/30/2023, the median income for a 1-person home is $69,653 (source: UST Means Testing "after 5/15/2023")

The "nonconsumer debt" also confuses me - does this mean debts for the business that I personally guaranteed, or *all* debts incurred by the business even if I did not personally guarantee them?

If your debts are 50.1% business debts then you can claim that your debts are "mostly" nonconsumer debt. This would be only for debt for which you are personally responsible.