When people are suffering tough economic times, especially in this economy, it is in their best interest to seek out compassionate and qualified counsel who can assist them in making sound financial and legal decisions that can help them achieve a fresh start.
At Washington Law, LLC, founded by experienced bankruptcy lawyer Rochelle D. Washington, we help people determine if they qualify to file for Chapter 7 or Chapter 13 using the means test. Contrary to what you might have heard, calculating your eligibility for bankruptcy is not simply a matter of plugging in numbers. The means test requires careful calculations and thorough analysis of your financial situation.
To learn more about our services regarding how we can help you determine if you qualify using the means test, please contact us to schedule an initial consultation today. We also help people navigate the entire bankruptcy process if you qualify.
The First Step in Using the Bankruptcy Means Test
When starting to use the bankruptcy means test, first we must take all sources of available monthly income you have and see if it meets the median income criterion set out for Maryland by the U.S. Trustees program.
If you do not initially meet the median income criterion, don't worry or panic. You might still become eligible after your income is adjusted to reflect your disposable monthly income once allowable deductions in various categories of expense are calculated.
These expense deductions are formulated from published information compiled by the IRS, the Census Bureau and a wide variety of additional federal agencies. We are knowledgeable in how to use these deductions properly to ensure your income is calculated correctly, and we keep up-to-date as they change.
The Second Component of the Bankruptcy Means Test
The deductions allowed are quite detailed and are broken down by county, metropolitan areas, census regions, family size, income, number of vehicles and various other metrics. We are familiar with the specifics allowed for Temple Hills and the surrounding areas of Maryland. Among the allowed deductions are the following daily expenses:
- Living expenses as specified under the collection standards of the IRS for debtor's household size
- Allowed housing and utility expenses for debtor's household size for the state and county in which debtor resides
- Ownership costs related to debtor's vehicles (not to exceed 2 vehicles)
- Operating costs (gas, tires, oil, maintenance, registration) related to the operation of debtor's vehicles and/or public transportation
- Deductions for federal, state and local taxes, excluding real estate and sales taxes
- Involuntary deductions required for employment: such as mandatory retirement plans, union dues and uniforms
- Costs related to pagers, call waiting, caller ID and Internet that are necessary for the health and welfare of the debtor or debtor's dependents
- Health and disability insurance premiums and contributions to health savings account
- Amount actually expended for child care such as babysitting, day care, nursery and preschool (does not include expenses for education)
- Home energy costs in excess of allowances, provided there is proper documentation and the excess amount does not exceed 5% of the allowed amount
Additionally, the following types of specific expenses can also be used to readjust your median income:
- Term life insurance premiums for the debtor(s) only — no other type of life insurance or persons allowed
- Court ordered payments such as alimony, child support or other domestic support obligations
- Average monthly amount actually expended for health and welfare of debtors or dependents that is not reimbursed by insurance or paid by a health savings account and is in excess of the allowance — provided there is adequate documentation to support the expense(s)
- Expenses incurred for the care and support of elderly, chronically ill or disabled household member, or member of your immediate family who is unable to pay for such expenses
- Continued contributions to any tax-exempt charities in accordance with past giving not to exceed 15% of the debtor's Schedule I gross income Form 22 current monthly income
- Expenses incurred for protection against family violence
- Education expenses for dependent children under the age of 18 that the debtor(s) actually incur, not to exceed $147.92/month per eligible child — must be able to provide documentation as to the reasonableness and necessity of the expense and that it is not included elsewhere
Finally, these specific bankruptcy-related expense calculations can also be used to figure out your adjusted income:
- Actual expenses for administering a Chapter 13 plan
- 1/60th of secured debt that will become due in the five years after the filing of the bankruptcy case (each secured debt must be examined to determine whether it is for the purchase of a luxury item as such purchases may be disallowed by the bankruptcy court)
- 1/60th of amount necessary to "cure" defaults on secured debt such as home mortgage defaults and defaulted automobile or other secured loans
- 1/60th of all pre-petition priority debt such as priority tax obligations, child support or alimony claims for which you were liable at the time of the bankruptcy filing
Once your current monthly income (CMI) is determined using all available deductions and an accurate number is arrived at, it must be compared to the median income for your area in Maryland. Rochelle Washington is an experienced Upper Marlboro bankruptcy means test attorney who knows how to use the deductions properly to calculate adjusted income as well as how to compare it against the median income for Maryland that is articulated by the U.S. Trustee's program.
If you do meet this threshold, you are on your way to potentially passing the means test and qualifying to file for Chapter 7 bankruptcy. More analysis, however, must be done to determine if there are any other issues that might impact your ability to qualify for bankruptcy and specifically which type of bankruptcy, Chapter 7 or Chapter 13, best fits your needs and your particular financial situation. We will help you with these follow-up steps and we will be by your side if you do qualify to file for bankruptcy.
It should be noted that the median income, the above figures and the deductions allowed for living expenses, transportation expenses housing and utility expenses, health care and the allowance for education-related expenses for dependent children under the age of 18 are subject to periodic adjustment, which may increase or decrease the allowed amounts in any of the categories applicable to the means test.
The Third Step in the Process of Determining Bankruptcy Eligibility
The third step measures your ability to pay at least 25% of your unsecured debts in a five-year period. If you have the ability to pay at least 25% of your unsecured debt over a five-year period, then you are eligible for Chapter 13 protection; filing a Chapter 7 bankruptcy when you have the ability to pay at least 25% to your unsecured creditors is presumed to be abuse of the bankruptcy laws, a form of fraud, and can result in serious consequences. We can help you avoid this happening by using the means test and bankruptcy protections properly.
It is also possible that even if you do not have the ability to pay at least 25% to your unsecured creditors, you may still be able to file for Chapter 13 bankruptcy protection in an effort to cure defaults on secured debt such as home mortgages, car loans or other secured debt for non-luxury property.
Although not everyone who is financially stretched automatically qualifies for bankruptcy relief under current law, when you have us on your side we can help ensure that. The Bankruptcy Abuse Prevention and Consumer Protection Act, also known as BAPCPA and passed in 2005, established a means test to help debtors determine if they qualify for bankruptcy eligibility. The purpose of this test is also to determine who may be able to repay some of their debt and who will need many of their debts to be discharged.
Contact an Experienced and Dedicated Prince George's County Chapter 7 Attorney Today
If you would like to have your finances examined to see if you qualify for the bankruptcy means test, reach out to us for compassionate, personable legal assistance and representation. We provide a free 15 minute consultation to all new clients. For an appointment, contact our office online or call us at 301-952-8005.
Our office is conveniently located with easy access to the Branch Avenue Metro. Visa and MasterCard are accepted.
"We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code."
This statement is required by 11 U.S.C. Section 528(a)(4) without substantive modification by any firm that assists in filing bankruptcies under the federal bankruptcy code, however, it does not state the full range of service available from this firm.