Am I Eligible to File Bankruptcy?

Means Test

Debtors who earn less than the median income pass the means test on the first go around. Debtors who earn more than the median income must go on to round two and complete a complicated analysis of income and expenses to determine if they have disposable income to pay their unsecured creditors at the end of the day.

The means test is supposed to tell if a debtor has money left over after living expenses to pay creditors. It says, at least in theory, whether filing a chapter 7 bankruptcy would be abusive or if a chapter 13 payment plan bankruptcy is required. It also determines if the payment plan must be at least three years or five years.

Most Kansas Debtors Pass Means Test

Don’t despair, the means test is not a problem for most Kansas debtors. Even for those people who are required to file a chapter 13 payment plan, the payments are usually far, far less than paying all the debt. The interest, penalties and late fees also stop in most cases. Many times, very little of the general unsecured creditors are paid back in a chapter 13 bankruptcy case. The amount is based upon your income. Household with high income and low expenses will likely pay some of the general creditors.
The income figures are based upon census data by family size for your state. The U.S. Trustee Program publishes a table of median income for use in future bankruptcy cases. Official Bankruptcy Form 22A or 22C (Statement of Current Monthly Income and calculations). Bankruptcy Form 22A is the chapter 7 form. Form 22C is the chapter 13 form.

If your family income is less than the Kansas median and you are filing your case in Kansas, you are eligible for either chapter 7 or chapter 13 bankruptcy relief.

  1. $45,980
  2. $60,577
  3. $66,065
  4. $76,017
  5. add $8100 for each family member over 4 (for cases filed May 1, 2015 or after).

If your income exceeds these figures, don’t despair, you still may pass the means test on the second go through. Most clients do.

Many people, including other lawyers, misunderstand the means test and conclude incorrectly that the median income figure is the end of the analysis. You may still qualify for bankruptcy if your income is greater than the Kansas median for your family size. We will have to fill out the long means test form to determine your options. Some clients may not be able to file chapter 7 bankruptcy and may have to pay a portion of their debt back in chapter 13 bankruptcy.

Unfortunately, the bankruptcy means test is a complicated formula with many variables and different court rulings from place to place. It cannot be easily calculated. There are all kinds of legal arguments over what types of money are income and how income is calculated. Believe it or not, there are debates over what is a family? The definition may include income from other members of your household even if they are not related to you or claimed on your tax return or contributions toward your household expenses you are receiving from someone else such as your parents or child support.

We calculate the means test for our clients so you do not have to worry about it. Most people in Kansas pass the means test. Stop being stressed out by bills you can’t pay! Get the fresh start only the federal bankruptcy laws can give you. Call Mark and Jill today. We can help! 785-354-1471

 

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