Masachusetts Shave Business Blog

The bankruptcy means test could be a new source of pain for consumers as the recession deepens. The 2005 Congress tied everyone together in a community and, perversely, elected to punish consumers who live in the hardest hit communities more. In a nutshell, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 dictates that consumers with average income over the prior six months which is greater than the median of a similar size household may be presumed to be abusing the bankruptcy process if they file Chapter 7 bankruptcy. A more detailed test may still allow the consumer to proceed, or they may prove special circumstances to the court’s satisfaction. But the bottom line is a higher threshold of scrutiny and a narrower window for relief.

If you fail the means test in bankruptcy, but you file chapter 7 anyway, the United States trustee will file a motion to dismiss your case or to allow you to convert it to a Chapter 13 bankruptcy. A bankruptcy judge may allow you to stay in a chapter 7 bankruptcy if you have extenuating circumstances that convince the judge you need to file chapter 7 and it’s not abusive. If, for example, you fail the means test because you received a one-time disbursement of income, such as a personal injury settlement or severance pay, a judge would probably determine that the Chapter 7 bankruptcy is not abusive. Many times with the proper advice you can still stay in a Chapter 7 bankruptcy bankruptcy. If at all possible, be persistent because the outcome will be debt elimination on all unsecured debts.