New Bankruptcy Means Test Figures as of November 15, 2013- What does it Mean?

Bankruptcy Lawyer

As part of the Bankruptcy Reform act of 2005, every person filing bankruptcy has to complete a “Means Test”. The means test uses figures from the IRS as to median incomes throughout the US. The figures are updated so that, as of November 15, 2013, new figures are used. Here is the link:

http://www.justice.gov/ust/eo/bapcpa/meanstesting.htm

The means test was designed to “weed out” those who, in Congress’ opinion “could pay” some of their debt back, and have the test show how much they should pay back. There are 2 parts to the means test. In the first part, if your family‘s income is below the median income for your state, you would automatically qualify for Chapter 7 bankruptcy and eliminate debts. Or, if you do a Chapter 13 case, to pay a minimal amount on your unsecured debts. (debts such as credit card and medical debt). This is based on your last 6 months of income.

If your family is over the state median income, that does NOT mean Chapter 7 Bankruptcy is out as an option. It only means that you have to go a step further. In the second part of the test, if you are over the median income, then you (with the help of an experienced attorney) have to complete the second part of the means test. In the second part of the means test, you are allowed to deduct certain expenses, such as for income taxes, living expenses, and car and house payments. It is a complex mix of allowed expenses, and expenses that can vary by the family.

So, what do these new figures mean? In Illinois, the figures are going up, significantly. In Illinois, the income levels are:

Family Size 1 2 3 4
ILLINOIS $47,536 $61,253 $70,014 $81,680

For each family size in Illinois, the yearly income increased, and it increased the most for families with 2 or more people. This is good if you are trying to qualify for bankruptcy, because with the higher income levels, overall, it will be easier to qualify. It’s also good, because it shows the US economy in certain parts of the country is improving.

If you want to know how the means test works, and how you’d stack up, call us at BankruptcyLawChicago. We can help you sort it out.

Daniel J. Winter
BankruptcyLawChicago.com
djw@DWinterLaw.com
312-789-9999
Offices in Chicago, Gurnee, Oak Lawn, Skokie, and Waukegan, Illinois.