Saturday, February 18, 2012

Means Test Chapter 13

For a detailed explanation of the Means Test you might want to read The Bankruptcy Means Test Explained In English.

One of the biggest problems with the Means Test (and there are many!) is that if you have over a certain amount of Disposable Income ($182.50 in current monthly income available after allowed deductions, which equals $10,950 over five years) you are presumed to be abusing the Bankruptcy system by filing a Chapter 7 bankruptcy.

Because the Means Test takes a cookie cutter, one size fits all approach to expenses. Some examples:

• You are only permitted to claim $147.92 per month per child under the age of 18 for educational expenses, and you are going to have to have documentation to support those expenses.
• If you must be in a Chapter 13, you must be in it for 60 months if you are a an above means debtor. If you own an older vehicle and don’t have a car note, you can only claim an additional $250.00 per month for maintenance expenses.  If you want to purchase a vehicle during your chapter 13  you must have approval from the trustee. You might be allowed a car payment of about $350 a month.
• In a Chapter 13 bankruptcy you are permitted to treat your withholding for retirement plans such as 401K expenses as an expense for your health and welfare, but you are not permitted to claim this expense in a Chapter 7 bankruptcy.