Chapter 7 Bankruptcy and the Means Test
Prior to 2005 those who wished to file a Chapter 7 liquidation bankruptcy had little difficulty in doing so. However, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed at that time to protect creditors from loss of their interest when an individual has the means to repay the debt. Those who wish to file for a total liquidation of debts now may need to complete a means test. A Bryan bankruptcy attorney can assist you in making sure that you provide all the necessary information.
Presumption of Abuse
A means test is triggered when an individual's income meets or exceeds the median income of residents of Texas. The purpose of the means test is to determine whether the debtor actually has the means with which to pay the debt rather than liquidate. It should be noted that a Chapter 13 bankruptcy does not include such a test, since it is designed merely to reorganize debt to make payment more feasible.
The rules for the means test are somewhat complicated; therefore, one may wish to work with a Bryan bankruptcy attorney. In essence, however, an individual tallies his total monthly income, then subtracts regular monthly expenditures, such as house payment or rent, car payment, etc. A presumption of abuse occurs if the test shows that the individual has enough liquid assets to pay creditors $10,000 within a six month period, and 25% of the total owed.
If no presumption of abuse is determined, or the debtor's total income falls below the state median, creditors cannot file a motion to dismiss the request for a Chapter 7 bankruptcy. If, however, such a presumption is found, the trustee will notify the court clerk, who in turn will notify creditors within 10 days. A motion to dismiss must also be presented by the trustee to the clerk as well. In such case the debtor will not be able to proceed with a Chapter 7, but may have the option to file a Chapter 13 reorganization of debt.
Contact a Bryan bankruptcy attorney for Further Assistance
If you need assistance with filing for bankruptcy protection, a Bryan bankruptcy attorney at Peterson Law Group will be happy to work with you. We will provide you with quality legal assistance and help you through this difficult matter. Call to arrange a consultation today at 979-703-7014.
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