What are the "means test"?
means test was a late addition to the bankruptcy law (also called BAPCPA) to apply to all cases of bankruptcy submitted after October 17, 05.
behind the "means test" or "income test on basis "was understood that some of the well to do debtors and unfairly using bankruptcy to unsecured creditors account (mainly credit card companies).
before BAPCPA, debtors who have high levels of income and can afford to pay back at least some of its debt (credit cards) incur huge balances on their credit cards, and then file for bankruptcy, and the performance of all their credit cards .
test result that debtors with an average income mentioned above (this differs from state to state) you can not file Chapter 7 bankruptcy and can only benefit from Chapter 13 bankruptcy / payment plan.
Chapter 13 bankruptcy requires a court approved repayment plan to pay unsecured creditors over a five year period. This is in contrast to Chapter 7 bankruptcy, where that is usually discharged debtor's unsecured creditors with little or no payments go to these creditors.
is not surprising that most of it would be that the debtors would do instead of Chapter 7 with little or no payments to unsecured creditors of payments for those same creditors over the next five years.
In short, any debtor can file Chapter 7 if they earn less than the median household income for the state. If the debtor's income is above average and then Chapter 13 bankruptcy would be the only alternative available to ease the debt burden. If only ... the debtor can "win" average condition.
exceptions to the test on income
Assuming that bankruptcy Chapter 7 is better than Chapter 13. batting income-based test means finding a way to debtor above average to file Chapter 7 bankruptcy under the current provisions of the Code bankruptcy.
review, if the debtor has an income higher than the average then they could not provide the chapter 7 bankruptcy and can, if they choose, Chapter 13 bankruptcy file.
If the debtor greater than the median income for a family size, and then entered the test means prohibits the debtor to provide bankruptcy Chapter 7. However, the calculation of the initial income is only the first part of the test
under the Bankruptcy Code The following are exceptions to the means test:
exception No. 1: bankruptcy Code allows the debtor to ask the basic living expenses of the average income of their above.
when it is put up these expenses, if the income is still less than the minimum median income debtor eligible to Chapter 7.
exception No. 2: For disabled veterans (as defined by 38 USC §3741 (1)) that occurred in the first place during the time he was a veteran in the actual debt service (as defined in 10 USC §101 (d) (1)) or during the performance of homeland defense activity (as defined in 32 USC §01 (1)) does not arise presumption of abuse. Does not apply to the text and the way to these veterans or homeland defenders and they can always file Chapter 7.
exception No. 3: For reservists and members of the National Guard. The actual service or activity to defend the homeland. Members of the reserve unit of the armed forces, and members of the National Guard who have been called up to active duty (as defined in 10 USC §101 (d) (1)) after the Sept. 11, 01, for a period of not less than 0 days or who performed defend activity home (as defined in 32 USC § 01 (1)) for a period of at least 0 days and are excluded from all forms of means testing during the actual period of service or activity to defend the homeland Oll 540 days thereafter ( "exclusion period"). It means test does not apply to the Guard reservists and National and they can Chapter 7 file any time during the period of exclusion
exception 4: If your debts are primarily debt is consumer testing methods do not apply to you. Definition of bankruptcy "consumer debt" by law "... the debt incurred primarily for personal, family or household purposes." Ninth Circuit interpreted the term "primarily" in § 707 (b) (1) to mean that your non-consumer debt is fifty-one per cent less than the total debt. In re Canales, 377 B.R. 658 (Bkrtcy.CD Cal., 07).
In plain English, if more than half of your debt from a failed business, and income taxes owed to the last, or in "some cases" student loans, then the means test does not apply to you. If, for example, you have invested in several real estate and bankruptcy filing now and total loans on your rental property beyond personal debt by one percent at least, does not apply to a test means you. Here you can make a Chapter 7 even if your income is the average income.
If you are considering bankruptcy and you are the debtor above average, and choose a lawyer that will spend some time to help you determine whether you can beat the test methods and providing chapter 7.
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