Passing the Means Test--Don't assume

At Perkins Olson we continue to talk about "passing" or "failing" the means test.  If you are thinking about bankruptcy don't assume that your income is too high to qualify for a Chapter 7 Bankruptcy.  While the point of departure is the current Maine median income (which you can find here) that number is only part of the calculation to determine whether you qualify for a Chapter 7. 

In addition to the income calculation, you also need to know the allowable expenses, the amount of the payments you will face on mortgage and other debt you will affirm, tax debt and even the total claim against you. 

My experience has been that unless someone comes in with an income well over the median number, many debtors have expenses or other factors that eat away their income to a level that allows them to qualify for Chapter 7. 

While that can be good news, it can also be frustrating since, I often cannot tell you if whether you will qualify or not until we have taken the time to do the input and analysis. 

Small things can make a significant difference, particularly the timing of a bankruptcy filing since there may be more paydays in some months and the median is adjusted up or down periodically. 

The Chapter 13 Trustee reminded me that being forced into a Chapter 13 should not be perceived as "failure," but for many debtors there is no advantage in the more time consuming and often more expensive Chapter 13. 

The bottom line is that means testing is usually not simple and you should take the time to understand all of your options.