Articles Posted in Means Test and Bankruptcy

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The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, commonly known as BAPCPA, imposed a “means test” on those filing bankruptcy. This means test primarily determines whether the chapter 7 filing is “presumptively abusive”.

In order to determine whether a presumption of abuse exists, the debtor’s current monthly disposable income (as determined by the means test itself) is multiplied by 60. If that amount is is equal to or greater than the lesser of $10,000 or 25 percent of the debtor’s non priority unsecured debt, the presumption of abuse exists.

Presumptively Abusive doesn’t mean that the filer is a bad person…it just means that if the filer were allowed to stay in the chapter 7 bankruptcy and gain a discharge of debt, the law wouldn’t be followed.

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A chapter 13 bankruptcy requires that an “above median” debtor take a “means test” in order to determine how much that debtor must pay to unsecured creditors during the plan. This amount is called “disposable monthly income”

A key to obtaining a favorable i.e. low number is to be able to show the highest “budget” possible when taking this test.

In an attempt to do so, many bankruptcy filers throughout the U.S. have been showing as part of their budget the debt owed on cars they know will be surrendered, with some mixed results.