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The Law Offices of Roger J. Yehl

Chapter 7 and the Means Test

When Congress enacted BAPCPA, the Bankruptcy Abuse Prevention and Consumer Protection Act, in 2005, many people believed that Chapter 7 Bankruptcy no longer existed. A chapter 7 bankruptcy is also known as a liquidation bankruptcy. The means test was enacted with BAPCPA under 11 USC §542. The means test in simple terms is a mathematical computation designed to determine whether individuals filing for bankruptcy are taking advantage of their income and expenses.

The income portion of the means test is calculated by utilizing six (6) months of pay stubs or other sources of income and dividing by 6 to create a monthly figure. This number is then multiplied by 12 and compared against an IRS created annual figure based on where you live. If your calculated annual income is less than the IRS created figure, you meet the guidelines of the means test for filing a Chapter 7 bankruptcy. If your income is greater than the IRS created annual income figure, then you must complete the balance of the form using a mixture of IRS allowed expenses and some actual expenses. It is a very complicated formula and only an experienced attorney can help you to maximize your expenses and qualify for Chapter 7.

This is where price shopping does not benefit you. Many people filing for bankruptcy tend to price shop which makes sense considering their circumstances. However, price shopping can cost you thousands in the long run. To learn more about price shopping and how it can affect your bankruptcy outcome, read my article on here.

Roger J. Yehl

About the Author Attorney Roger J. Yehl has been achieving successful outcomes
during pre-trial negotiations as well as in the courtroom, defending
clients on nearly all types of bankruptcy cases.