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You will Love Passing the Means Test. And You Will Thank God for the Opportunity! The Religious Liberty and Charitable Donation Clarification Act of 2006

By Joseph McDaniel, Esq.

The Means Test was designed by the evil drafters (that's one word) of the BARF Act, which amended the Bankruptcy Code in 2005, changing the Code from a fairly evenhanded statute to a user-hostile construct.

In general, you get to pass the Means Test (and therefore file a Chapter 7 Bankruptcy) if your income is below the median income (here's a calculator) in your geographic area for the six months prior to filing your bankruptcy (note: that means that you will hire a bankruptcy lawyer when you are fired, to keep creditors off your back, but you won't be filing for several months, until the average of your salary, plus unemployment, permit a Chapter 7 bankruptcy filing).

Don't try to figure it out yet; just relax and let it wash over you. As the months move forward, you initially have five months of high income, and one month of unemployment. Then you have four months of high income, and two months of unemployment. At some point within six months, your average monthly income will drop low enough to permit the filing of a Chapter 7 under the Means Test. 

You may also be able to pass the Means Test by surviving a complex calculation (and when I say complex, I really mean complex. It's complicated and convoluted enough that the Supreme Court keeps clarifying what the drafters of the 2005 Bankruptcy Amendments really meant!), and to help people with that calculation, I have posted a link to a free, online, Means Test Calculator in my Arizona Bankruptcy Homework Blog. Just scroll down through it.

But some folks make more money than the median income, and the median income keeps going down as more people get tossed out of their jobs because of outsourcing, or downsizing, or rightsizing, or the bankruptcy of their employers.

But if you are, say, 15% above the median income, then you may be rescued.

By me?

No. By God!

While miracles are a little scarce unless you live in Lourdes, one modern miracle is a wrinkle associated with the means test.

It turns out that charitable contributions up to 15% of the debtor's gross income can be donated to a Church, for instance, and it comes off the Means Test numbers for a determination whether a debtor can file a Chapter 7, and the amount of the payments if a debtor is going to be filing a Chapter 13.

Take a look at the Religious Liberty and Charitable Donation Clarification Act of 2006; I'll post the text of the statute as soon as I get a (wait for it) Round Tuit.

 

Full post as published by Arizona Bankruptcy Attorney Blog on January 15, 2011 (boomark / email).