The Homework Blog

File Bankruptcy Under Chapter 7 and the New Code

In 2005 bankruptcy code was amended to force more people to file Chapter 13 bankruptcy cases than chapter 7. In Chapter 13 bankruptcy, people pay their disposable income for up to five years to a bankruptcy trustee who then pays the money, plus his commission, to all your creditors. The 2005 bankruptcy code, came up with a means test to figure out if a debtor with more than median income, meaning makes more than 50% of the people in his state, overcomes the presumption of abuse when he tries to file bankruptcy under Chapter 7 instead of a Chapter 13 bankruptcy case. Congress devised a plan to help you figure out if you make more than median income. This has that they came up with is called the means test. It requires you to figure out your current monthly income which is neither current or monthly. What you do is you take the average of your gross income from all sources for the last six months. You then divide this by six to get a current monthly income and then multiply this by 12 to find out what your income for a year would be at the rate of the average gross income you receive during the past six months. Next you will compare this to the median income of your state and for a family of your size to see if you are above or below the median income. That’s why when you hire a bankruptcy attorney he will ask you for your pay stubs for the last six months. Not many people like this, it costs you time and money, but it is a new law.