Updated Means Test Median Income

The bankruptcy median income means test has been updated on November 1st, 2017. This number, based on family household size, is used to determine whether or not you must repay unsecured creditors through Chapter 13 bankruptcy.

The new chart for annualized, gross income is as follows:

• Household of 1- $51,960
• Household of 2- $62,359
• Household of 3- $77,306
• Household of 4- $91,692
• Household of 5- $100,092
• Household of 6- $108,492
• Household of 7- $116,892
• Household of 8- $125,292

How do you make sense of this to determine where you fall? Well, for one thing, the means test is a 6 month look-back at ALL income (excluding Social Security). So, if you have no children or spouse, you would look at the allowable income for a household of 1. The number listed above is for GROSS (before tax) income, and it is annualized. If you are a household of 1, divide the allowable income by 2 (in this case $25,980). If you grossed more income in the 6 months before filing, you are above the means test baseline, and must then determine your "disposable monthly income."

If you are married, you must include all household income, even if your spouse is not filing. Income includes pensions, unemployment earnings, bonuses, and even lottery winnings. Legal dependents, usually children, will add to your household size (the rule of thumb is, if you have claimed a child as a dependent on your taxes, you can claim them in bankruptcy).

So, add up all gross income for the six months before filing, determine your household size, divide the threshold amount by 2, and you should have a pretty good idea if you will be required to repay your unsecured creditors.

There are some allowable deductions, such as taxes, alimony, insurance, and household expenses that could lower your income. The means test is fairly complicated. Contact us to set up a free consultation. I will be happy to review your income and expenses and determine whether or not you must repay your creditors. I am an experienced bankruptcy attorney who can walk your through the intricacies of bankruptcy law. I can help you to plan for the means test, and review every loophole (for instance, the means test does not apply if your debts are primarily business).

Determining Your Debt

The main purpose of bankruptcy is to discharge your debt and get a fresh start. The first step should always be determining what are your debts exactly. This sounds simple enough, and for the most part it is. However, it should not be overlooked. When you meet with an experienced bankruptcy attorney, you will want to have a firm grasp of your debt for a couple reasons.

First, your bankruptcy attorney will need to know what type of debt your have so that they can determine whether or not it can be discharged. Not all of your debts can be wiped out in bankruptcy. For instance, credit cards and medical bills can be discharged, but most student loans and taxes cannot. Your attorney will need to know all of your debts in order to advise you as to what can be included. Remember, your attorney will not know your debts, it's up to you to make sure they have the complete picture of your situation. 

Second, all of your debts must be disclosed in order for them to be discharged. Debts not included in your bankruptcy petition will survive the filing. That means creditors can collect on these debts, even if they should have been discharged. Now, in most cases, your attorney will be able to amend your bankruptcy filing to included these debts. However, that will cost money and take time. It is better to have everything up front for your bankruptcy attorney to review.

So, how should you go about organizing all of your debt for your attorney? The first step in determining your debt should be running a credit report. These will give you a list of most creditors who claim you owe money, though sometimes not all, as I will discuss later. A good credit report should show all of your reported credit card debts, bank and car loans, and mortgages. It should also include old, closed out accounts. Review this credit report closely to make sure nothing is missing. You can order your free yearly credit report, or my office can order a bankruptcy specific report for a fee. It is worth the money and time.

Next, you will want to gather any bills that do not show up on your credit report. Credit reports agencies will not show debts that are not reported to them. Medical bills are often not reported, therefore you should make sure you gather up all medical statements. Medical bills can grow large, and fast, so make sure you find them all, even if you need to call and ask for a statement.

You should also gather any utility statements and payday loans, as these are also often not reported. If you don't have statements for everything the first time you meet your attorney, that's OK. But, make sure your attorney knows everything you know. He or she can determine if the information is important and relevant to bankruptcy. It is better to share too much than too little. I have had numerous clients, for instance, who have had far more medical debt that they initially assumed. Once they started looking for medical statements, they unearthed more and more.

Finally, take an expansive view of "debts" when you speak with a bankruptcy attorney. It is not just credit cards and medical bills. It can also be money owed to an old landlord, a family member, or an insurance company. It can include relatively new debt, or old debts from years ago. And there are sometimes exceptions for debts that are not normally discharged, such as school tuition and taxes. If in doubt, tell your bankruptcy attorney.

Contact us if you would like to set up a free consultation to review your debts. We can discuss whether or not your debts can be discharged, and look at all of your options.

Why Must All My Property Be Listed In My Bankruptcy?

My clients often become concerned when I tell them that we must list all of their property in the bankruptcy petition. The common fear is that they will lose their property. This is dangerous misconception, as it sometimes keeps people from filing when bankruptcy is their best option. The internet and bad information lead many scared individuals into my office.

To some degree, it is an understandable fear. If you are wiping out your debt, and in many cases not repaying any creditors, it may make sense to believe you must surrender property as a penalty. However, this could not be further from the truth. The Bankruptcy Code is designed to allow individuals a fresh start and the chance to get back on their feet.

Personal property and real estate are protected in bankruptcy with "exemptions". Exemptions, in short, "exempt" your property from your creditor's reach. These exemptions fall under state and federal law, and while they are usually not unlimited, they are normally sufficient to protect all of a bankruptcy filer's property. Exemptions can protect a wide range of property, from equity in a home, to personal items, cars, and retirement accounts. The categories are too broad to list. It suffices to say, if you own something, it can be exempted from your creditors.

However, in order to exempt and protect your property, you must first list it in detail. This is done in Schedule "B" of your bankruptcy petition. The detail required is not excessive... you do not need to list individual personal items. You don't need to catalog every last piece of silverware and every sock and t-shirt in your drawer. However, you must list large items (such as homes, cars, and retirement accounts) in some detail, and you must determine an estimated value.

The purpose of this list in Schedule "B" is NOT to provide your creditors a shopping list of things to go after. Quite the opposite, the purpose is to show what they CANNOT go after. This is because all of this listed property is exempted one schedule later in Schedule "C". In this way, your bankruptcy petition sets out what you get to keep, not what you must lose.

This all being said, the value of property owned by a debtor may sometimes exceed the exemptions, especially when it comes to the value of homes. In these case, Chapter 13 bankruptcy will still be an option. You will still be able to keep all of your property. You may, however, be required to make a repayment to some creditors. This can all be discussed in a free consultation. Contact us to set one up today.

I often tell my clients who are afraid they will lose something of value that, "I am not in the business of losing property of my clients." This is very true, but in order to be so, we need to list your property first. We list it so you can keep it!

When You DON'T Need To File Bankruptcy

It might seem odd for a bankruptcy attorney to tell you not to file bankruptcy, but I do it quite often in my practice. Now don't me wrong, there are many situations when individuals facing large debts should absolutely consider filing bankruptcy. However, there are situations where it is not so clear. So, when should you NOT file bankruptcy?

The first situation is when your debt burden is manageable without bankruptcy. If your total debt can be handled outside of bankruptcy, you probably do not need to file. That amount will be different for every individual. For someone on a fixed budget (such as Social Security), a lawsuit judgement for even a few thousand dollars could necessitate a bankruptcy. Higher income individuals may be able to avoid bankruptcy even when they owe many times more. A good rule of thumb is to look at how much you are able to reduce your debt burden in a normal month. If you can put a healthy dent in your debt each month, you may not need to file. However, if you can only make minimum payments on your credit cards, or you can barely pay your utilities, you should strongly consider filing. I have found that people have a pretty good feel for when their debt is beyond their control, but it is often good to discuss it aloud with a professional.

A second situation where you may not need to file is when the bulk of your debts are not dischargeable. For instance, student loans are not normally discharged in Chapter 7 bankruptcy. If almost all of your debt is student loans, obviously bankruptcy will not be much help. Bankruptcy will not eliminate your debt. Taxes often raise the same issue. In rare cases, credit card debt is not dischargeable, even if only temporarily. I will be happy to discuss what types of debt are not dischargeable to see if filing is worthwhile.

Another situation where filing bankruptcy may not be in your interest is if you want to get a mortgage in the near future. Bankruptcy will not prevent you from getting a mortgage forever, but it will make the process more difficult to complete for at least a few years. I talk to people in this situation occasionally, and whether or not to file is determined by a few important factors. If your debts are large and your savings are low, getting a mortgage may be impossible anyways. If your debt is manageable, and especially if you expect an increase in income in the near future, putting off bankruptcy in order to get a mortgage may make sense.

Thoughtfully considering an individual debtor's circumstance is an important part of my job. Sometimes filing bankruptcy is inevitable. Sometimes it is avoidable. Contact us to set up a free consultation, and I will be happy to sit down and consider all of these factors with you.

Chapter 13 Bankruptcy Timeline

Every bankruptcy case is different, especially so for Chapter 13 bankruptcies. However, a common timeline runs through nearly every case. Knowing this outline helps my clients to better understand the process and requirements. Here is a brief overview of the important moments in a Chapter 13 bankruptcy.

The first important moment is the filing of the case. This occurs after all the necessary paperwork and documents have been provided, and a Chapter 13 plan and petition are filed. However, an "emergency petition" can be filed when necessary, allowing the case to be filed before everything is ready. When an emergency petition is filed, all the necessary documents and papers must be filed within 14 days. This is a very important deadline, because the case will be dismissed if it is not met. Therefore, it is important to not file an emergency petition unless absolutely necessary. When a case is filed under normal circumstances, your attorney should file everything within a few days and get nowhere near any of the deadlines.

When the case is filed, a Chapter 13 Meeting of Creditors will be scheduled for (roughly) four-to-six weeks later. The meeting of creditors is discussed in more detail elsewhere in this blog. However, it is only important to note here that appearance at this meeting is mandatory. You will generally be allowed to reschedule once. Missed appearances after that threaten the case being dismissed. It is advisable to make sure you have made the first payment in your plan by the time this meeting is held.

A second hearing, called a "conciliation conference" will be scheduled at the meeting of creditors. You will not be required to attend this hearing. Your attorney will amend your plan (if necessary) in the weeks before this hearing. This will occur if there are new claims to be accounted for or objected to, or if corrections need to be made to your plan. Assuming the amended plan is accepted, the bankruptcy case will be approved on a final basis at this hearing. If not, additional amendments can be made. After the planned is confirmed, you only need to make sure all of the payments are made on time.

Assuming all goes well with the case, the final requirements will occur at the end, or closeout, of your case. You will need to complete the second bankruptcy course, and review a motion with your attorney attesting that you have completed all of the requirements in your case. You won't need to make an appearance, but you will need to be in touch with your attorney. Once the case ends, you may need to start paying your mortgage again. Your attorney will explain the closeout procedure.

Contact us if you are considering filing a Chapter 13 bankruptcy and wish to review the process in more detail. We can set up a free consultation to discuss your situation in detail.