As I have discussed on the O’Connor, DeGrazia, Tamm & O’Connor website (and as several bankruptcy attorneys have discussed here), in order to qualify for Chapter 7 protection, individuals must satisfy the “means test,” which is a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. 11 U.S.C. § 707(b). Only bankruptcy filers with primarily consumer debts, not business debts, need to take the means test. High income filers who fail the means test may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 bankruptcy to wipe out their debts altogether. While 11 U.S.C. § 707(b) is intended to prevent high earners from unfairly using Chapter 7 to wipe out debts that they could otherwise repay, some have complained that the means test is unduly complex and can lead to unfair results.
Effective March 15, 2010, the Census Bureau’s Median Family Income Data, Chapter 13 Administrative Expense Multipliers and IRS Allowable Living Expense figures have been revised; those revisions are available from the U.S. Department of Justice’ website here. As noted on the Department of Justice’ website, most individual debtors filing for bankruptcy relief are required to complete either Official Bankruptcy Form 22A or 22C (Statement of Current Monthly Income and calculations). Bankruptcy Form 22A is the form Chapter 7 debtors will complete for “means testing” purposes while Form 22C is the form Chapter 13 debtors will complete.
A debtor must enter income and expense information onto the appropriate form and then make calculations using the information entered. Some of the information needed to complete these forms, like the debtor’s current monthly income, comes from the debtor’s own personal records. However, other information needed to complete the forms comes from the government-issued statistics referenced above.
If you are considering bankruptcy, it is important to consult with an attorney to determine whether you qualify for Chapter 7 under the Means Test.