analysis of the means test

[StaciMM]

In general, if you have disposable income then you are not 'bankrupt'.

The median income standard is primarily in place to make it more difficult for 'high income' filers to file ch. 7 and get a total discharge of their debts. The IRS standards put 'normal' limit amounts on standard expenses. For example, if you're a household of 1 and spending $1000/mo on food-even if you really were spending that before filing-the court will argue that you're spending too much there and need to adjust your habits.

You can't have your cake and eat it too. You can't file bK because you have the ability to pay your debts but would rather use the money elsewhere. Bk is for when there really are no other options.

[LostOne0069]

I understand that bk is there for if you have no other choice... I guess my confusion is in what the median income standard is for... I mean, how does it do more to stop the "high income" people from doing chapter 7 if the allowable expenses will catch them anyway.

oh well... I go talk to an attorney today... maybe he can explain it to me. I'm hoping for chapter 7 but expect that we'll end up chapter 13 instead even though we're below the "median".

[StaciMM]

Jim, I think its just a step thrown in to discourage people from filing BK and to give the trustees more say in what is or is not allowed.

[bkfiler]

it gets trickier then youd imagine. also those tables dont represent everything you could claim as expenses. its just trying to limit the main categories.

read again.

[JimH]

A person can qualify for a ch 7 under the "means test" but still be forced into a ch 13 under the "general abuse provision" of the code. The old code required "a substantial abuse" to be proven. Now it only has to be "an abuse", so be careful. Just make sure that you submit a budget that has no excess money left over to pay creditors.

[JimH]

Jim, I think its just a step thrown in to discourage people from filing BK and to give the trustees more say in what is or is not allowed.

Hey Staci, I haven't seen you in awhile. It's nice to see your avatar is not being used by others today.

[LostOne0069]

Thanks everyone. Hopefully everything will work out for the Ch 7... I talk to the attorney in an hour so we'll se what happens.

[bkfiler]

Hey Staci, I haven't seen you in awhile. It's nice to see your avatar is not being used by others today.

i agree!

[StaciMM]

I'm offline for 13 hours & a few minutes and everyone notices. It is nice to be loved!

Hey Staci, I haven't seen you in awhile. It's nice to see your avatar is not being used by others today.

[JimH]

filer,

roflmao...ROFLMAO.....that's the stupidest avatar I've seen yet.

[bkfiler]

i got hungry!

[StaciMM]

He could have made the head fit better...

[JimH]

He could have made the head fit better...

Yeah, I know I have a big head but come on Filer.

[JimH]

But then again with a head like that, who would want it to be a normal size.

[Rona123]

Whether it was created with this intent or not, I think the means test ends up only skimming off the very top layer of filers. If I understand the process correctly, you can pass the means test and then still be pushed into Chapter 13. As I mentioned on another post, the means test is VERY beneficial in the expenses it allows you to claim, but when you complete your schedule J for ACTUAL expenses, it is likely to be far lower than the means test. For example, I have two vehicles, so was able to claim expenses for both on the means test. But since one vehicle is paid off and has very few actual expenses, my schedule J vehicle expenses were significantly lower.

I think the only real benefit of the means test is that if you fall below the median income, as I did, then it takes away the chance for creditors to attempt to contest the filing, and limits what the trustee can do as well. I should show this to my lawyer, because even though my income is below my state's median, he insisted that I still had to complete the means test. The result, of course, was that there wasn't anywhere even close to a presumption of abuse on my part.

IMHO, a link to this document should be given a sticky, as it will answer a great number and type of questions that newbie filers (myself included) have asked and will continue to ask.

Ron