We create strategies that minimize the impact of the Chapter 7 and Chapter 13 Means Testing, which means creditors receive less money
As many of you are aware, the bankruptcy laws underwent a major overhaul in 2005. The most significant change was the adoption of the “means testing” for all bankruptcy cases. Basically, the means testing is a formula adopted to ensure that debtors with higher earnings pay back as much to creditors as possible. In our opinion, the means testing has done nothing but complicate a system that was already working just fine, but unfortunately it is a reality that the lawyers and clients must now deal with. However, if your means testing is done correctly, then your bankruptcy case will probably result in little or no repayment to your unsecured creditors. In fact, there are strategies that can be implemented before the filing of your bankruptcy case to minimize the impact of the means testing. Only the most experienced bankruptcy lawyers are familiar with some of these concepts.
If your income is “above median,” then your case needs special attention
If your income exceeds the median income in New York for your family size, then your mean testing form is more likely to be scrutinized by the Office of the United States Trustee and the chapter 13 trustee or chapter 7 trustee assigned to your case. We have helped hundreds of “above-median” income debtors work through the means testing issues in the bankruptcy process, and we are extremely aggressive in our approach. While many chapter 7 cases can probably be handled by your “family attorney,” if your household income is close to or exceeds the state median, then it is important that the means testing calculations be handled by an attorney with experience in these types of cases. The present median income figures for New York State are as follows:
Household of 1 $46,485 Household of 2 $58,109 Household of 3 $69,421 Household of 4 $82,457
For each additional household member, add $6,900.
A couple of things to keep in mind when reviewing these numbers: First, your household may consist of anyone living in your household, even if they are not related to you or filing bankruptcy with you. Second, your “household income” may include the income of your spouse, boyfriend, girlfriend, children, parents, and even roommates. The goal in preparing the case should always be to present the household size in the most favorable way and exclude to the extent possible income of other people living in the home.