The Bankruptcy Means Test is Mean

by Paul Staley
Wednesday, 24 September 2008 22:54

As the economy continues to struggle, layoffs are rising. Large manufacturers are cutting production. laying off workers. According to Wall Street Journal article published Monday, September 22, 2008, many retailers are paring back seasonal hiring. The layoffs come at a bad time, since many displaced workers will not have the leisure of being able find a new job by just crossing the street, as maybe they could have done in better times. New foreclosures will rise again because fired workers can't make their house payments.

When some of them turn to bankruptcy for relief, they'll have a fight on their hands. Why? Because the 2005 revision of the Bankruptcy Code requires the debtor - the person filing for bankruptcy - average his six most recent months income to pass the Means Test If you don't pass you cant file

Someone who earned, say, $6000.00 per month for six months straight and then got fired, say, in September, even though he / she has no income during October, the paperwork he submits will show income of $6000.00 on the means test. If expenses nearly equal that income, a "presumption of abuse" arises, meaning the debtor probably has to file a Ch. 13 instead of a 7. In theory, this was supposed to stop people from acting "too quickly". In practice, most people had waited a few months anyway, and now many are forced to wait even longer.

There is hope if you don't pass the means test. A good attorney can portray your financial situation in the best light. There are options in the choices that an lawyer can make so you can pass the means test and move on with your life. If you have been to one attorney and they say you cant file, it won't hurt to see another.