If you file chapter 7, you need to complete Form 22A, the Statement of Current Monthly Income and Means Test Calculation. But if you file a chapter 13, and then convert the case to chapter 7 are you still obligated to file the Means Test form? A Massachusetts Bankruptcy Judge has ruled on this important issue (In re Guarin, 09-42294 JBR).
Posts Tagged ‘Means Test’
Knowledge is Power, Sort of
Tuesday, March 3rd, 2009
I find that many people who are thinking about it will want to investigate some facts about bankruptcy, and get some information about the process before they pick up the phone and speak with me. And certainly, there’s much information and content on this website – and it’s here for just that reason. But every lay person needs to maintain some perspective when researching, reviewing and digesting information about bankruptcy and the bankruptcy process. Today, I had a conversation with a client that reminded me to remind you to keep that perspective.
The most important thing to remember is that research should not replace speaking with counsel and getting a full and fair opinion. Nothing on this site is designed to be legal advice. As a matter of fact, you’re unlikely to find anything that amounts to legal advice on the internet.
What you will find is information. But sometimes, that information can lead to overload – and overload and can lead to confusion. And today I encountered confusion.
I spoke with a client on the phone who “had done a lot of research” about bankruptcy. He knew and understood terms like the “Means Test” and “Discharge.” But he did not quite understand how the Means Test worked – or that the Means Test applied in not just Chapter 7, but that a different version of the form (with entirely different consequences) applied in Chapter 13.
He asked what most might think is a rather straightforward question: “In a Chapter 13, how will they determine how much I can afford to pay back?” The problem with this seemingly straightforward question is that there is no straightforward answer. There are many variables, including whether you are over the state’s median income, whether you have payments on secured debt and the status of the case law at the time (and because it is ever-evolving, I tend to view the case law as a moving target). The other problem is that I cannot answer the question in a phone call or a short initial consult meeting. It requires information, documents, and an assessment of all of the factors at the time of the filing.
The client is already frustrated, and I can understand why. Struggling to make ends meet, the client is trying to determine what more will be expected of him and his family in the bankruptcy process. Yet, there is no easy answer I (or for that matter anyone else) can provide. At least not an honest one. The fact I could not provide a quick answer only fed that frustration.
I would not think of going to WedMD to learn how to perform a medical procedure on myself. I don’t call my dentist to explain why my mouth hurts (which is a good thing, because as I recently learned, it wasn’t what I thought it was). So with that said, please know I do not recommend using this site, or any others as a substitute for sitting down with a bankruptcy attorney and giving them all of the information they require. Then, armed with the facts and sound legal counsel, you can then make the best decision to protect your family from the oppressive debt you find yourself struggling with. After all, that is why you’re calling me. And that is why you’re researching bankruptcy information on the internet.
Honesty Goes A Long Way
Monday, July 21st, 2008
Today I received a call from a prospective client who was upset with their current bankruptcy attorney. They claimed that their current attorney was not giving them accurate advice, specifically, that the attorney had informed them that information pertaining to a non-filing spouse’s income and expenses was not needed to prepare a bankruptcy filing. That’s generally not the case, but in this instance, the parties had only been married for a short period. But when I started asking some other basic questions, what I got in return was whole a lot of bull.
The caller told me that the husband and wife resided together for about a year prior to the wedding. I told the caller that based on that, I would be required to consider the non-filing spouse’s income not only for the schedules (income and expenses), but also for the means test (actually, it’s the Bankruptcy Code that requires it). But as soon as the information was disclosed, the caller started back-peddling.
The Two Edge’s of BAPCPA’s Sword
Tuesday, November 13th, 2007
There’s been a lot of debate over how unfair BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) is on consumer debtors. Some of that debate can actually be found on this site. There have been aspects of BAPCPA that I have called silly, and some that we have to question the logic on. Recently, the US Bankruptcy Court in New Hampshire issued a ruling that appears to correctly interpret the post-BAPCPA Bankruptcy Code, but also shows how absurd the amendments to the code may be.
Prior to BAPCPA, a Chapter 7 filing was not presumed to be an abuse of the bankruptcy code. Abuse needed to be proved by the party claiming it, and a finding of substantial abuse could lead to dismissal or conversion
Under BAPCPA, the word “substantial” disappeared, leaving only “abuse.” Also, the means test was implemented, creating an objective means to determine whether there is a presumption of abuse. If there is a presumption of abuse, the United States Trustee must file a report indicating whether the case is presumptively abusive under 11 U.S.C. Section 707(b) within 10 days of the creditor’s meeting. Within 30 days after that, the US Trustee must either file a motion to dismiss or convert the case, or a statement explaining the reasons why the US Trustee does not consider such a motion to be appropriate.
In the New Hampshire case, the US Trustee wanted to compel the debtor to produce documents as well as submit to a Rule 2004 examination (which is something like a deposition, but isn’t really the same thing – which is another subject I should write about sometime). The US Trustee argued that it did not have enough information to evaluate whether the debtor’s case was presumptively abusive. The US Trustee also argued that under Rule 9011, she had an obligation to conduct a reasonable investigation before filing a motion. Under this rule, a party can be sanctioned for filing a baseless pleading in court. In response, the debtor argued that the US Trustee’s request was overbroad and unduly burdensome.
“Both parties are right,” the court wrote “and both parties are wrong.”
What’s Income, and What’s Not?
Wednesday, July 18th, 2007
In yesterday’s post, I discussed the definition of “Current Monthly Income” as set forth in Section 101(10A) of the Bankruptcy Code. Currently Monthly Income is used to determine whether someone is “abusing” the bankruptcy process by filing a Chapter 7 petition, when they (arguably) should be filing a Chapter 13 petition. The Current Monthly Income (or CMI) calculation does not include “benefits received under the Social Security Act.” This would obviously include Social Security benefits, such as those received at retirement. But would this apply to other sources of income that might emanate from the act? How about DUA or unemployment benefits? A Massachusetts Bankruptcy Judge recently said yes.
In this case, the married debtors excluded from their CMI the $1,010 monthly income the wife was receiving in unemployment benefits. The US Trustee objected and sought to dismiss the case, claming that the unemployment benefits should be included in the CMI calculations, and if the income was included, there would exist a presumption that the bankruptcy process was being abused (what we also refer to as the “presumption of abuse”). Debtors argued that the unemployment compensation was a “benefit under the Social Security Act” and that Social Security Act included received as unemployment compensation.
