The Means Test Revised

Periodically the United States Trustee, taking information from the Internal Revenue Service and the United States Census Bureau, revises certain information used by bankruptcy filers in completing the means test. Effective November 1, 2010, new median income figures will go into effect, which will impact most potential bankruptcy filers when they determine whether they are eligible for Chapter 7 (straight bankruptcy / liquidation) or Chapter 13 (debt readjustment / payment plan).

In Massachusetts, where I practice, the median income for an individual filer, a family of three, and a family of four or more has gone up somewhat. Oddly, the threshold income for a family of two in Massachusetts has gone DOWN by over $2,000.00 per year. This means that some couples that might qualify for a Chapter 7 case on October 31, 2010, may no longer qualify the next day, and may be forced to consider a Chapter 13 payment plan as a path to a fresh financial start. This is true even though this hypothetical couple has had absolutely no change in their personal circumstances.

By the same token, an individual living alone, or a family with a household size of three or more that did not qualify for Chapter 7 previously, may, after November 1st, now qualify for a Chapter 7 case.  This can mean the difference between a 5 month path to a discharge and a 5 year path.

It is important to keep in mind that Chapter 7 is more beneficial for some people, while Chapter 13 is far superior for others. As with all bankruptcy issues, no advice is “one size fits all” but is totally dependent upon your individual financial circumstances. The means test can impact this decision by depriving certain filers of the choice.

A qualified and experienced bankruptcy attorney can help you to make the best decision for you, based on your personal circumstances. To schedule a no-cost, no-obligation consultation, call the Law Offices of James Wingfield today at 508-797-0200 or visit the contact page on our website.