The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 introduced new eligibility requirements for individuals seeking bankruptcy relief and mandated that a “means test” be used to determine whether a debtor may file under Chapter 7 or Chapter 13 of the Bankruptcy Code. The “means test” established a complex formula for calculating the debtor’s ability to repay debts that could otherwise be discharged in bankruptcy. On October 1, 2008, a critical component of this formula will be adjusted, with significant consequences for those considering bankruptcy.
The “means test” compares the debtor’s income (adjusted for household size) to the median average monthly income in the state where the debtor resides. For purposes of this calculation, the median income figures for each state are determined by the United States Census Bureau and are updated annually. The United States Trustee Program, part the Department of Justice that oversees the administration of bankruptcy cases, will update its data on October 1, 2008. The data for each state will be available both as a chart on its website and in downloadable MS Excel format (http://www.usdoj.gov/
Based upon the estimates currently available from the United States Census Bureau, the median income figures for most states are expected to increase from the prior year. Variance in the median income figures among the states is substantial and anyone considering a bankruptcy filing should confirm the data for their state of residence.
The “means test” calculations can be confusing and using the wrong data may result in the bankruptcy filing being dismissed. Although there are a number of resources available to assist individuals in making these calculations, finding an experienced bankruptcy lawyer will ensure that the bankruptcy petition and disclosure schedules are properly completed and filed.
For more information about the “means test” and other timely bankruptcy law developments, visit http://findabankruptcylawyer.info/
