Chapter 7 Bankruptcy & the Ridiculous Means Test

As a result of George Bush and his co-horts, the Bankruptcy Code was amended in 2005. One of the modifications, essentially made it difficult and almost impossible for some people to file a Chapter 7. Basically, if a person's income is over the median income in the state (as determined by the IRS) then that person has to be tested (means test) to determine if he or she can pay back a percentage of debt to his or her creditors within a 5 year span. This measurement is based upon a review of 6 months of the filer's income preceding the filing. Based on the 6 month review, the potential bankruptcy filer may be forced to file a 5 year Chapter 13.



To some this is reasonable, after all, what is 5 years? However, it is not black and white. Before the economy tanked many people believed that the means test was appropriate in order to stem what was perceived as an abuse of the bankruptcy system. However, now the means test is utterly ridiculous and it has caused many good people to suffer. I practice in Maryland and I have met with many people who simply cannot file a 7 due to the means test and are not able to file a Chapter 13. The means test doesn't take into account certain extenuating circumstances such as a person whose income during the 6 month period included bonuses or overtime that he will not see again.

Look at it this way. A person who fails the means test must file a 5 year chapter 13. In order to file a 13 a person must have regular and stable income in order to pay a required monthly payment. There are many people who fall through the cracks and cannot possibly make such a monthly payment due to unemployment or other issues. The code does not give any real discretion to the trustee or the Court. You fail the means test you have to file a Chapter 13. End of story.



You would think that Congress would quit fooling around during these harsh economic times and abolish or at least temporarily suspend the Means Testing. I remember reading that there is a possible movement to do this. Yet nothing is happening. Does anyone else get the sense sometimes that our elected politicians are basically death, blindfolded monkeys who cannot even simply ring their cymbals?

(see my website at www.ominskylawoffice.com)