As A Tulsa Bankruptcy Attorney We Want You To Understand The New Means Test Numbers for Oklahoma
As A Tulsa Bankruptcy Attorney we want to help you understand what the means test is. The income figures used in the Means Test formula are updated every six months.
The income figures used in the Means Test determine who has the option of filing for Chapter 7 bankruptcy. As a Tulsa Bankruptcy Attorney we will require you to take the means test in order to determine if you are eligible for Chapter 7 bankruptcy.
For example, a person living alone currently qualifies for Chapter 7 if he/she earns less than the state median income for a household of her size.
The current median income figures for Oklahoma households can be found at: http://www.justice.gov/ust/eo/bapcpa/20140501/meanstesting.htm
If gross household income falls below the pertinent numbers, an individual or married couple passes the Means Test and automatically qualifies to file a Chapter 7 bankruptcy.
As a Tulsa Bankruptcy Attorney we want you to understand that a person whose household income exceeds these figures may still qualify for Chapter 7 bankruptcy if he/she has enough allowable expense deductions to offset his/her above median income or if the projected amount of disposable income would pay less than 25% of the total unsecured debt.
As A Tulsa Bankruptcy Attorney We Want You To Understand What Will Happen If You Fail The Means Test
As a Tulsa Bankruptcy Attorney we want you to understand that an individual who fails the Means Test and does not qualify to file Chapter 7 bankruptcy may choose to file a Chapter 13 bankruptcy instead.
As A Tulsa Bankruptcy Attorney We Want You To Understand What The Means Test Is
As a Tulsa Bankruptcy Attorney we want to help you understand what the means test is. The means test is a Bankruptcy Code was significantly amended with a general effective date of October 17, 2005. It was Congress’ intent to make those who could afford to pay back a portion of their debt ineligible to eliminate their debt in a Chapter 7 bankruptcy. This intent is being carried out by the advent of the “means test”. This test can be invoked by any creditor, the trustee, the court or the U.S. Trustee.
To determine if a debtor can afford to pay back a portion of his debts, you must complete a formula that takes into account income and expense figures based on IRS guidelines.
You must first take the debtor’s current monthly income (CMI). If the debtor’s CMI is less than the state median income, the debtor can file a Chapter 7 and no further calculations are required. For information on state median incomes, visit http://www.census.gov/hhes/www/income/statemedfaminc.html
Current Monthly Income is not determined by the income made during the current or previous month. The actual (CMI) is the average monthly income received by the debtor and the debtor’s spouse in a joint case during the six month period prior to the petition date. This effectively prevents a debtor who is out of work for one month from claiming that he cannot pay back his debt. He may in fact have a high (CMI) if his income from the prior five months was great. So you can see that Congress has tightened the loophole. Under the old law, an out of work debtor would be scrutinized as of the date of filing. Under the new law, a larger snapshot is taken to determine if the debtor has the means to pay back his debts.
If the debtor’s CMI is greater than the state median income, you must fill out the remainder of the means test formula to determine whether the debtor can file a Chapter 7.
As A Tulsa Bankruptcy Attorney we want you to understand that if the debtor’s CMI less allowable deductions is less than $100.00 per month, then the debtor can file for bankruptcy under Chapter 7. If the debtor’s CMI less allowable deductions is greater than $166.00, then the debtor must file a Chapter 13 bankruptcy.
If the debtor’s CMI less allowable deductions is between $100.00 and $166.00, then he may need to file under Chapter 13 depending upon the amount of unsecured debt and the percentage that could be repaid using the debtor’s disposable income over a five year period. If the disposable income amount is not enough to pay 25% to unsecured creditors over a five year period, the debtor can file a Chapter 7. Thus, the amount of debt is a factor in determining whether the debtor must file a Chapter 13. The greater the debt, the more likely that the debtor will be able to file a Chapter 7.
Additionally, you cannot utilize the debtor’s expenses when calculating disposable income. Disposable income is now based upon expense standards provided by the Internal Revenue Service as they relate to the local area in which the debtor lives.
As a Tulsa Bankruptcy Attorney we want you to understand that if the debtor has disposable income of $167.00 per month, he will always fail the means test, regardless of how much unsecured debt the debtor may have. Additionally, the Chapter 13 plan will have to be for five years, not three years.
As A Tulsa Bankruptcy Attorney We Want You To Understand The Means Test Can Always Be Rebutted
The presumption of abuse or failing the means test can always be rebutted. As a Tulsa Bankruptcy Attorney we want you to understand that the debtor will have to demonstrate special circumstances that would decrease the income or increase the expenses, so that the debtor actually qualifies for Chapter 7. For example, the debtor may have constant medical expenses which are beyond the limits of IRS guidelines. That debtor may be able to rebut the presumption of abuse under the new means test. Please contact an experienced Tulsa bankruptcy attorney to determine the likelihood that you will qualify for Chapter 7 bankruptcy relief.