The Pitfalls of The Means Test When Filing for Bankruptcy


It's funny how the subject of filing for bankruptcy no longer has the stigma that it used to have. Bankruptcy has become a common topic for people to talk about in middle America. Many people used to be afraid to let anyone know that they were in the midst of a bankruptcy filing or even a foreclosure. With so many Americans facing foreclosure and bankruptcy daily it has become such a common occurrence that no one seems to look down on those filing.

When facing the facts that filing for bankruptcy is in your future an individual needs to decide on whether they want to hire a bankruptcy attorney or go it alone. It's not advised to go it alone because there are many pitfalls when filling out the bankruptcy forms. One of the hardest to understand sections of the bankruptcy code is the means test. To the layman, understanding the means test can be quite a task.

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If you're an individual with a little bit higher than normal income and are considering filing for bankruptcy it's advisable to consult with a bankruptcy attorney to see if there's any way the numbers can be moved around to make sure you qualify for Chapter 7. It's a mistake to think you could do this yourself, walking through this minefield and end up stepping on one of these landmines. This is one of the areas where a bankruptcy attorney earns their money.

In the US Bankruptcy Code the means test is found on Form B22. The whole purpose of this form and the means test is to see if you qualify for Chapter 7 bankruptcy. If an individual does not qualify for Chapter 7 under this test they will be forced into Chapter 13 bankruptcy along with its payment plan. The information that is put into form B22 will also have an impact on the amount of monthly payments that an individual would have to pay if they were forced into Chapter 13 bankruptcy. With all this said, you can see the importance of having the means test filled out accurately to show your true financial picture.

Many people filing for bankruptcy complain that the information required on this form seems to include a lot of irrelevant financial data. What seems irrelevant to you might be important to your bankruptcy attorney. The bankruptcy lawyer will interpret the data and calculate the amounts to fill out form B22 in the correct fashion. The bankruptcy lawyer might decide, depending on the client's financial status, to delay the bankruptcy filing if the financial picture for the client has changed in the recent months. The means test has a six month look back period and many times that doesn't give a true financial picture of the debtor that is filing for bankruptcy.

An example of that would be a realtor that sold a piece of property six months ago and made $50,000. Since that sale they have had no other income and no irons in the fire for future income. By the formula this would basically show the individual making $100,000 a year and depending on where they lived and how many dependents they had they probably would not qualify. If the debtor waited a few months this income would fall off and they could easily qualify for filing Chapter 7 bankruptcy. That's one of the reasons that many feel the means test does not really give a true picture of a debtor's financial status.

Facing bankruptcy is not fun, but having the help from a bankruptcy attorney can give you the extra confidence you need in this difficult time. If you're buried under a mountain of debt and feel like you have no way out, contact a bankruptcy lawyer for consultation and put yourself on the road to becoming debt-free.


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