Much has been written about the bankruptcy reforms of 2005. The bottom line for consumers is that Congress attempted to make it more difficult to file a chapter 7 case by imposing income requirements. When Congress enacted the Bankruptcy Abuse and Prevention Consumer Protection Act of 2005 (BAPCPA), it overhauled the eligibility requirements for filing a Chapter 7 bankruptcy case. Most notably, a “means test” was included under 11 U.S.C. 707(b)(2)(A). The means test was designed to discourage debtors who can “afford” to pay back debt from wiping it out via chapter 7.

Pursuant to the means test, a Debtor’s income is compared to the annual median income of a household in the same state and the same size as the debtor’s household. Depending on the debtor’s home state, the annual median income can vary greatly. Under the means test, all income, from any source is included in the calculations. If the debtor’s income is less than the annual median income of a household the same size, the debtor qualifies for a Chapter 7 bankruptcy automatically. If the debtor’s income exceeds the state’s median, the means test comes into play. If after deducting expenses from income the debtor has an acceptable amount of disposable income (meaning almost none) then they can proceed with a chapter 7 case. The means test should be discussed with a bankruptcy attorney, it ain’t fun folks. If the debtor has a nonfiling spouse, calculating the average monthly income can be complicated. Below is a little stautory guidance:

Whether a nonfiling spouse’s income must be included in the means test calculations, depends on whether the nonfiling spouse contributes on a regular basis to the household expenses of the debtor and the debtor’s dependents. See 11 U.S.C.101(10A)(B). If the parties maintain separate finances or the facts suggest that different treatment is necessary, the debtor can rebut the presumption that the nonfiling spouse’s income must be included in the means test. However, the nonfiling spouse’s income will not be considered when the debtor and the spouse are separated or are living apart. See 11 U.S.C. 707(b)(7)(B). In that instance, the debtor must file a statement under the penalty of perjury specifying that the debtor meets the criteria of 11 U.S.C. 707(b)(7)(B) and disclose an estimate of the aggregate amount of any money received from his or her spouse which can be attributed to the debtor’s monthly income. The key factor when presented with a nonfiling spouse is sufficient documentation to rebut the presumption of abuse. If the presumption cannot be rebutted, the nonfiling spouse’s income must be included as part of the means test.