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The New Chapter 13 Means Test
In an effort to modernize some of the bankruptcy forms, the Courts have recently published a new version of Form 22, sometimes referred to as the means test. In this article, I will be discussing the means test in the context of Chapter 13 Bankruptcy.
In the latest release of the means test, the calculations are broken down into two forms: (1) 22C-1, which everyone has to fill out regardless of their income level or access to financial means, and (2) 22C-2, a form that must be filled out by those whose income is over the median income for a household size in their respective state.
Filling out these forms may feel a bit like doing your taxes. Many of the same accounting and deduction/credit principals are at play. When filling out Form 22C-1, you will be required to list your monthly gross income (before taxes and other deductions). This amount is calculated by adding together the last six full months prior to your filing bankruptcy and averaging them. Then the calculation doubles that number to determine your annual income. If you are below the median income based on your income and family size, then you have passed the means test and you have not need to complete Form 22C-2.
If you are above the median income, then there is a rebuttable presumption that abuse of the bankruptcy process exists. This sounds worse than it is. Basically, this just means that you now have to deduct certain various expenses to see if you can overcome the presumption of abuse. If, after you deduct the allowed expenses, you will either have a positive monthly disposable income, which means you will need to pay the disposable income into your bankruptcy plan over the next 60 months. Or, you will have a negative number, which means that you do not have any disposable income, and therefore might not have to pay any disposable income into the bankruptcy plan.
It is important to note that you still might need to pay disposable income into your bankruptcy plan if you have excess income after filling out Schedule I (monthly income information) and Schedule J (monthly expense information).
Perhaps the most important point I can make here is that the Form 22 means test is complicated. And while I discussed Form 22 in the context of Chapter 13, the means calculations can be just as complicated in Chapter 7. As you will see if you attempt to complete the documents yourself, you are likely realize that my brief description above just skims the surface of the Form 22 complexities. If you file a bankruptcy, your creditors will be represented by lawyers and you will have to interact with the trustee who is an attorney who represents the bankruptcy estate. You owe it to yourself and your family to be have an attorney representing your best interests in your bankruptcy. Contact us today for a free consultation.