Legal Services | Attorney | Personal Bankruptcy | Business Bankruptcy | Contact Us | Locations | Free Consultation

Texas Bankruptcy - The Means Test

The Bankruptcy Means Test

Under the old bankruptcy law, almost any resident of the United States could elect to file either a Chapter 7 or Chapter 13 Bankruptcy. Debtors whose debts were primarily consumer debts were subject to scrutiny by the trustee or the Bankruptcy Judge as to whether they had enough disposable income that allowed them to file for Chapter 7 Bankruptcy or whether their filing would be a "substantial abuse." If they did have enough disposable income, the case could be dismissed or the debtor could convert to a Chapter 13 Bankruptcy.

The new bankruptcy law now includes a formula test, called the bankruptcy means test, to determine who may and who may not be eligible to file for Chapter 7 Bankruptcy. The bankruptcy means test applies to people whose debts are primarily consumer debts (such as credit cards, car debt, or mortgages). Many people are forced into bankruptcy because of a failed business or a large business related judgment. Debtors with primarily business debts are exempt from the bankruptcy means test and may file Chapter 7 bankruptcy regardless of their income and expenses. The bankruptcy means test evaluates your income in comparison to the official median income for households in the State of Texas as reported by the Bureau of Census in the most recent reporting year. The median income base increases with the size of your household.

Debtors with an income equal to or below the Texas State median income for families of the Debtor’s size are exempt from the bankruptcy means test. For those Debtors with income above the Texas State median income, there is a presumption of abuse on the part of the debtor, which the Debtor has the burden of disproving.

The bankruptcy means test evaluates whether your current monthly income (from all sources) is greater or less than the applicable median income. Current Monthly Income or (CMI) has a special meaning under the new bankruptcy law. CMI is defined as the average monthly gross income received during the six full months preceding or just PRIOR to your filing for bankruptcy. In applying the bankruptcy means test, the Debtor’s average income over the past six months is used, regardless of present actual income. CMI includes gross income from all sources including income of a non-filing spouse, regular gifts or assistance from family members, and gross income from a wholly-owned business. (Business expenses are deducted elsewhere in the bankruptcy means test calculations.) Social security income is excluded from the definition of CMI.

If your CMI exceeds the State Of Texas median income, then the bankruptcy means test applies a more complicated expense formula to determine your eligibility to file for Chapter 7 Bankruptcy. The formula starts with your CMI and then deducts several categories of allowed expenses to calculate your "net monthly income" which is presumed to be available to pay general unsecured creditors. The bankruptcy means test deducts certain expense categories from "current monthly income" to arrive at your "disposable income."

Many Lawyers practicing Bankruptcy in Texas are finding out that the majority of people considering bankruptcy seem to be under the median state income initially and are mostly unaffected by the bankruptcy means test.

Although Debtors who are over the State Of Texas median income may have a more difficult time filing a Chapter 7 Bankruptcy and they may have to file a Chapter 13 Bankruptcy which requires a monthly repayment to creditors via the Chapter 13 Trustee. The bankruptcy means test will not prevent a debtor from filing a bankruptcy; it will only help determine what type of bankruptcy must be filed.

If you are considering Bankruptcy relief you must take the bankruptcy means test. Click here to take the bankruptcy means test and determine whether or not you are eligible for Chapter 7 or Chapter 13 Bankruptcy.

Bankruptcy Means Testing & Business Bankruptcy Cases

The Bankruptcy Means Test Does Not Apply in Business Bankruptcy Cases. Business Bankruptcy cases are the biggest exception to the new bankruptcy means testing requirements. Means testing only applies if the debts are "primarily consumer debts." The "means test" does not apply to cases where a person incurs most of the debt in connection with the operation of a business. Business Bankruptcy cases are completely exempted from the means testing requirements.

It is quite apparent that the New Bankruptcy Law favors business Bankruptcy Cases over Consumer Bankruptcy Cases. A court can not dismiss a business bankruptcy case under the abuse standards that apply to consumer cases.

At The Law Offices of R.J.Atkinson,LLC we are a Debt Relief Agency and represent people in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy in Houston, San Antonio, Austin, and Dallas. We may be able to assist you in filing for Bankruptcy under The Bankruptcy Code. Please contact us at 800-436-9056 for a free initial consultation regarding your financial situation or if you have questions about the means test in Bankruptcy. There is no cost to evaluate your situation but don’t wait until it’s too late.

Please read: Certification | Disclaimer | TexasLegalWeb | State Bar of Texas | Resource LinksLast Updated July 20, 2024
RJABANKRUPTCY © 2004 - 2024 RJ Atkinson, LLP Attorney At Law – All Rights Reserved
Austin Bankruptcy | San Antonio Bankruptcy | Houston Bankruptcy | Dallas Bankruptcy
Affordable Bankruptcy Fees | IRS Tax Problems
RJA Bankruptcy Attorney offer Affordable Bankruptcy, Debt Relief and Debt Consolidation. Texas Bankruptcy Lawyer offer Low Cost Bankruptcy Attorney Fees in Austin, Dallas, Fort Worth, Plano, San Antonio, & Houston *Principal Office.

Bankruptcy Lawyer / Attorney RJ Atkinson provides Chapter 7, 11, 12, 13, Bankruptcy, Debt Relief & Discount Legal Services
Filing Bankruptcy can sometimes be the fastest way to get out of debt and may be the most affordable way to get a fresh financial start. Chapter 7 Bankruptcy can quickly wipe out your debts, increase your credit score, stop wage garnishments, get rid of credit card debt, eliminate medical bills, stop payday loans, stop bill collectors, erase negative credit reporting, and reestablish new credit after bankruptcy. RJ Atkinson – Bankruptcy Lawyer have payment plans to make filing Chapter 7 and Chapter 13 Bankruptcy affordable which include low cost flat fees for Chapter 7 that may be considered the cheapest bankruptcy attorney fees depending on the costs other bankruptcy lawyer charge. Chapter 13 Bankruptcy can save your home from foreclosure, save your car from repossession, lower monthly payments, reduce interest rates, get rid of late fees, reduce credit card interest, payoff high credit card debt, raise your credit score, stop creditor harassment, get rid of debt, reduce debt, eliminate creditor calls at work, stop collection calls, start over financially, discharge debts and/or be debt free in 3 to 5 years. IRS tax problems, tax levies, wage garnishments, back taxes, payroll taxes, income taxes can often be handled in Chapter 13 bankruptcy. Divorce/Bankruptcy – past due child support arrears, alimony, spousal support, and divorce debt can often be handled in chapter 13 bankruptcy. The Law Offices of RJ Atkinson handles debt consolidation, loan modifications, credit card debt settlement, debt negotiation, lawsuit defense, IRS problems, credit card lawsuits, TROs temporary restraining orders to foreclosure, forbearance agreements to foreclosure, FDCPA Fair Debt Collection Practices Act lawsuits, FCRA Fair Credit Reporting Act lawsuits, credit report disputes, debt collection lawsuits, adversary complaints in bankruptcy, bankruptcies, foreclosure workouts, mortgage short sales, real estate property tax disputes, civil litigation, commercial litigation, tax lawsuits, small business bankruptcy, corporate bankruptcy, business creditor representation, and most every kind of debt related issue or financially based legal problem on a case by case basis.
Pursuant to 11 U.S.C. §528, “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”
R.J.Atkinson Texas Bankruptcy Lawyer - Principal Office: 8000 I.H. 10 West, Suite 600, San Antonio, TX 78230-3868. Phone: 800-436-9056