Means Test Meaner Again

Median income fell making bankruptcy means test meaner again for Kansas debtors seeking bankruptcy relief after November 1. All family sizes had drops in income since the May 1, 2012. The largest decreases were $1210 for single earners and $1864 for two-person households.
1 – $41,714  down $1210
2 – $55,698 down $1864
3 – $64,571 down $263
4 – $74,853 down $106
5 – $82,353 down $106
-  add $7500 for each additional person.

This drop in income makes the means test harder to pass for consumer bankruptcy cases filed on or after November 1. 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 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.

 

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About Jill Michaux

Jill Michaux is a Kansas bankruptcy attorney. She can be found on Google+ and Bankruptcy Law Network where she shares information about consumer bankruptcy law issues.