Chapter 7 Harder to File in Michigan After November 1, 2010

Chapter 7 Harder to File in Michigan After November 1

, 2010

The United States Trustee released the "means testing" numbers effective November 1, 2010. The "means test" began in 2005 when the bankruptcy law changed. It starts with the median income levels for family sizes. It uses information from the Census Bureau and IRS data. It is an attempt to create a mathematical formula to determine whether a bankruptcy filer is either a candidate for Chapter 7 or Chapter 13. Based on these numbers, the means test just got meaner.

Family size Median income thru Oct. 31 Median income after November 1 Change

Family size of 1: $41,875

Family size of 2: $49,919

Family size of 3: $59,190

Family size of 4: $70,600

For family sizes of 5 or more, add $7,500 for each additional person.

I presume that the lower income levels are because of the recession and the reduced incomes by families here in Michigan. Those probably affected the most would be a married couple without kids. If a husband and wife both earn $12.50 an hour and work full time, they would come in over the median income number.

All is not lost though, filers that fail to come in under the median income level have to complete the second part of the means test which looks at the debtors budget using a fancy formula Congress came up with. As you can guess, it is mostly detached from reality and it doesn't always take into account your particular circumstances. We are very familiar with the means test and, assuming you want to file a Chapter 7, we can make sure it's properly completed to maximize your opportunity to file a 7.

If you are thinking about filing a Chapter 7 bankruptcy and you are on the verge of the median income numbers for your household, you should consider filing before October 31, 2010. This doesn't give you a lot of time. You have to get a lot of financial documents together, complete your credit counseling and still give your lawyer enough time to prepare a well drafted petition.

To learn more about bankruptcy, please take some time to read The Bankruptcy Book or visit my website at: http://DownriverBankruptcy.com

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