Means Test Calculator

[ilovemycaitybug]

Hi everyone!

I am getting ready to file, just waiting on my hubby's pay information for the last six months (he gets paid by hand-written check, no pay stub, so he has to have it written out). So, I was wondering IF I would pass the means test for a Chapter 7 B/K. I found this website:

http://www.legalconsumer.com/bankruptcy/bankruptcy-means-test

I apologize if this has already been posted, but it was VERY useful for me. Make sure to change the zip code at the top of the page, I don't know why it defaults to Michigan. I hope it's accurate because it showed that I do pass. The first time I used it I didn't know to scroll down for more information to enter (deductions and such) - even though it told me I passed based on median income. I went ahead and processed all of it and wow, do we EVER pass! LOL (not really funny I suppose since that means we're poor even after b/k I guess!) But it makes me feel better. Just thought someone might find this useful if you haven't seen it before! I have no idea if it's accurate since we haven't done our means test with the attorney, so don't take this as the law - I'm no attorney!

[CPO]

ilove,

Thanks for the link.

Yes, that is probably the best calculator on the web, I know many here use it.

Remember, to "qualify" for BK7 due to being below the median income level for your state, you fill out Form B22A parts I,II, III,VIII only. Complete your calculations.

If you are below your state's median then the "presumption of abuse does not arise." This means you automatically qualify to petition the court for a BK7as far as income goes(assuming your figures are accurate). The presumption is there is no fraud, you "appear" to have no excess income that the Trustee can seize for distribution.

This allows you to petition for BK7, but does not guarantee you will slide past the Trustee without examination, free and clear.

Remember that.

Use Form B22A plus all other schedules, especially I and J, to calculate your real world situation.

Only carefull examination using all these schedules will reveal whether or not you actually have no real income/assets to pay your creditors. The Trustees job is to find this income(and assets). And, they will if it exists.

There are no free walks in this process.

It is possible, although rare, that you can qualify under the "presumption clause" for a BK7 but be pushed into a BK13 if it can be shown that you have substantial income(and/or non-exempt assets) that can be distributed.

So, the "median income" hurdle is usefull, probably a good indication of where you stand, but hardly the final word in BK7 cases. It's best that you look at the "totality" of your situation and petition on that basis.

Regards,

CPO

P.S. Might I suggest you pick up the NOLO Press book, "How to File for Chapter 7 Bankruptcy" by Elias, Renauer and Leonard. Make sure you get the May 2006 edition, ISBN 1-4133-0451-6. Amazon is great, that is where I purchased mine.

Read it carefully, then read it again. Use the forms. This will get you virtually all the facts of your case. Then study this site. That will get you the nuances....

[ilovemycaitybug]

Thanks for the reponse! I did go through the whole "calculation" from top to bottom, even though it told me to stop since I had already "passed". I ended up with the "Bottom Line":

Disposable Income
$-713 per month
($-42,777 over 5 years)
Bottom Line
Based on the information you have entered so far, you qualify for Chapter 7 bankruptcy because your income is below the state median income for a household your size.
Your average monthly income is $3,560 and you have entered allowed deductions totaling $4,273 per month. That would leave you with $-713 at the end of each month to pay into a hypothetical, five-year Chapter 13 bankruptcy plan. This would pay your unsecured creditors $-42,777 over the next five years, or -119 cents for each dollar of the $36,000 you owe them.

I think I entered everything correctly, as most of the time I used the default minimum entries except for auto expenses. Think I'm pretty safe? I appreciate all of your help!

[SinkingFast]

There's a "Sticky Thread" at the top of this Section titled "Links for Members". This BK Calculator Link is already in that thread.

There are many other helpful links there as well. Check that thread out.

You'll find links to the DOJ for Means Testing information, a BK Expenses Calculator, and much more.

CPO's suggestion to pick up the Nolo book is a good one as well. Lots of great info to be found there as well.

[SamanthaJones]

On the flip side?

How can you really have a negative income of over $700 after doing SCH I and J? Would that not give the trustee pause to think that...perhaps you have other income that is not listed?

[SinkingFast]

How can you really have a negative income of over $700 after doing SCH I and J? Would that not give the trustee pause to think that...perhaps you have other income that is not listed?

It is possible, based on Schedules Allowables, to have a significant deficit monthly income. But many people in financial distress give up lots of necessary things.

No doctor's or dentist's appointments unless absolutely necessary.

Many only buy clothes or shoes when absolutely necessary, if at all. The Schedules Allowable for Clothes is in excess of $300/mo for a family our size but we certainly did/do not spend that much.

But, you make a good point, Samantha. A person filing using a seasoned BK attny would not show a -$700/mo budget in the Petition. The attny would "adjust" the Expenses Figures on Schedule J to show the Debtor/Filer about even each month.

With a significant monthly deficit, the Court may have pause to think the case was a "bad faith" filing.

[sofarindebt]

I am confused about the calculations

We pass the means test, make about $73K/year with household of 5. Median income is $84K. BUT, I put in gross income per month and it says we have $788 disposable income left for a chapter 13. Do they consider taxes taken out? They must know that we do not actually "take home" $6000/month, but more like $46-$4800 after taxes.

Which income do they use, gross or net?

[CPO]

...gross...before taxes are deducted. You will find that payroll deductions are made on Schedule I. The means test uses "gross" income only.

So, if you "pass" the means test, i.e. you are below the median for your state, then you can petition for a BK7 without it being shot back in your face for abuse.

Does not mean that some smart Trustee cannot try and force you into a BK13 to pay some of your debt, if the Trustee can find income you don't need to support yourself and family according to the schedules.

There are rare cases in which one "qualifies" as under the median income level for their area and yet are saddled with a BK13 because they have substancial income which is distributed to their creditors.

You must still calculate income and expenses via schedules I and J to see what your actual situation appears to be.

Remember, the Trustees job IS TO FIND INCOME AND ASSETS for distribution. Make no doubt about it. The means test only protects you from being immediately dismissed for presumed abuse of the BK code.

Some lawyers "juggle" figures to better match local criteria. They don't lie, just move figures around to better match your living conditions and the requirements of law. There IS room for this, as long as it's done correctly.

I suggest a consult with an attorney. This "new" law has confounded and confused some situations.

Regards,

CPO

[SamanthaJones]

Gross income vs net.

The median is gross income. The means test starts as gross income, if you continue form 22A you then deduct paytroll taxes, and etc. Schedule I is gross income, then you deduct taxes and etc. on Schedule J. You may pass the median income (eligible for 7) and even pass the means test (eligible for 7) and yet then show excess available income (eligible for 7 or maybe not) on the schedules that could lead you into a 13 repayment. All the more reason to keep a clear head, and educate yourself fully before contemplating a BK, if there is time to spare. If you are over on one form, there seem to be lots of options- decrease hours at work, increase expenses (take on a car payment, refi your mortgage to have a higher payment), research your allowed exemptions...etc. Whew- what a tangled web they have weaved? And already there is talk that the new law is a dud and stupid- and the pushers (credit industry) also see that it is backfiring on them since there are many ways to fit into a 7, even with the new law.

[SinkingFast]

Since you're below the Median, you'd file Form B22A. Once you get to Lines 13 and 14, your actual Earned income would be compared to the Median. Then on Line 15, you'd check the box "Presumption does not Arise" and you're done with the Means Test.

It is possible for a "below the Median" filer to have sufficient disposable income to fund a Ch 13 plan. And to be forced into Ch 13 by the Court. But we haven't seen a post of that type on the Forum yet. And people here scan BK Attny's Blogs, news sites, and such to learn about current Opinions and Decisions.