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Archive for January, 2020

The Bankruptcy Means Test

The Bankruptcy Means Test operates in two ways:

  1. It will determine if you qualify for Chapter 7 Bankruptcy; and/or
  2. If you do not qualify for Chapter 7 Bankruptcy, the means test establishes what you are required to pay your creditors in a Chapter 13 Bankruptcy.

What is the Means Test?

The means test is based on income and was established as part of the amendments to the Bankruptcy Code, and enacted by Congress in 2005 (BAPCPA). The means test takes into consideration the individual’s income for the six months preceding the month prior to filing.

If your income is less than the median income level, then you are presumptively eligible to file a Chapter 7 Bankruptcy

In Georgia, the current median income for a family size of 4 people is $85,763.00. For a family of 2, it is $63,850.00. If your income exceeds the median income level, you may likely be required to file a Chapter 13 Bankruptcy.

A majority of the deductions that are taken on the means test are standardized. Some of the actual deductions that can be taken are: income taxes, health insurance, mandatory retirement accounts, court-ordered domestic support and care for an elderly/ill/disabled household member.

Talk to a Bankruptcy Attorney

A qualified bankruptcy attorney will work with you to determine your eligibility for a Chapter 7 Bankruptcy, and will explain the pros and cons of Chapter 7 Bankruptcy versus other alternatives. Your attorney will help you complete and submit 2 forms: Chapter 7 Statement of Your Current Income and the Chapter 7 Means Test Calculation Form. Even if you do qualify for a Chapter 7 under the means test, there are additional considerations as to whether a Chapter 7 is the best choice for you, your family and your current financial situation.

If I am Married, Can I Still File Bankruptcy Individually?

Many people wonder if it is possible to file for bankruptcy without their spouse being part of the bankruptcy. This article will answer this question.

There are several key things to consider when filing for bankruptcy if you are married

First, a married person can either file bankruptcy along with his/her spouse or file individually. Usually, married couples file together when they have joint debts. However, one spouse can file by him/herself if desired. If both spouses want to file for bankruptcy, it is best to file jointly. This way, you pay only one filing fee and one attorney fee.

If preventing a bankruptcy from appearing on your spouse’s credit report is important, then you may consider filing individually.

Second, if there are joint debt(s) (i.e. debt(s) in both spouse’s name(s)), and only one spouse files for bankruptcy, then the creditor is not barred from pursuing payment, or collecting the debt from the non-filing spouse.

Third, the issue of income of the non-filing spouse is just as important as the income of the filing spouse. Provided both spouses live in the same home, both incomes count. This will be determined by the Means Test. The Means Test does two things: 1) it determines the individual’s eligibility for Chapter 7; and 2) if he or she is not eligible for Chapter 7, the Means Test establishes what they may be required to pay back to their creditors in Chapter 13.

If the total income falls below the median income level in the state where the bankruptcy is filed, then Chapter 7 is an option

This would eliminate completely eliminate all debt that is not reaffirmed. If the total income is above the median income level in the state where the bankruptcy is filed, then the only bankruptcy option is Chapter 13. This requires repayment of some or all the debt over a period of up to five years.

Several other factors that you and your attorney will discuss to determine whether or not to file jointly include:

  1. the amount of property you own
  2. the type and amount of joint debts
  3. the exemption laws of the state in which you file.

Since filing for bankruptcy individually can still have consequences for your spouse, it is very important to meet with a qualified attorney to make sure you are making the correct choice for the both of you.

Will I Lose My Home if I File for Bankruptcy?

The short answer to this question is no, you will not lose your house

There is no requirement in the Federal Bankruptcy Code that requires you to surrender your home. How relevant your home is in a Bankruptcy proceeding depends on the chapter of Bankruptcy that you file.

Chapter 13 Bankruptcy

Filing a Chapter 13 Bankruptcy can do a number of helpful things; regarding your home, you can stop a foreclosure proceeding and/or bring all of your mortgage arrears current through the Chapter 13 Plan that you, your attorney, and the Chapter 13 Trustee agree upon.

With a Chapter 13 Bankruptcy Plan, you will be making a monthly payment to a Trustee. This payment will include any past due amounts owed to your mortgage company. You must also continue making your regular mortgage payment and keep your ongoing mortgage payments current. It is important to make your Trustee payments for the entire duration of your plan (usually 3-5 years) and to not miss any of your regular monthly mortgage payments.

Chapter 7 Bankruptcy

Filing a Chapter 7 Bankruptcy only puts your home at risk if you are delinquent on the payment to the mortgage company and/or there is equity in your home. In a Bankruptcy proceeding, there is only equity if your home’s value exceeds the amount owed, plus your allowable exemptions. The exemptions are specific to the state in which you file. If your home is not exempt, then it can be sold by the Chapter 7 Trustee. The money made from this sale is used to pay your creditors.

A qualified Bankruptcy attorney will determine all of the necessary qualifications for you, and make sure that your case proceeds smoothly.

Preparing for a 341 Meeting of Creditors


Upon filing a Chapter 13 Bankruptcy petition with the U.S. Federal Court, your case will be assigned by the Court to a specific Trustee that will oversee, and administer your case. Once a Trustee is assigned to your case, a Creditor Meeting under Section 341 of the Bankruptcy Code will be scheduled by the clerk of the court. The clerk will then send a notice of the time and place of this meeting to you and all your creditors.

You must appear at this meeting and answer questions from the Trustee about your petition.

Your creditors do not usually attend this meeting. The Trustee will ask you a series of questions related to your bankruptcy petition, schedules and relate documents that were filed with the court. This meeting is fairly quick. Your attorney will attend this meeting with you but cannot respond to the questions for you. You will answer these questions under oath, so it is imperative that you are honest.

Once the 341 Meeting is underway, some of the questions asked may include the following:

  1. Did you read and sign all the documents related to your case?
  2. Is all the information in these documents true and correct?
  3. Are all your creditors listed, including friends or relatives to whom you owe money?
  4. What is your reason for filing for bankruptcy?
  5. Are all your assets listed on your petition, including any and all bank accounts of any kind, real property in any country, and any and all personal property (jewelry, art, collectibles, vehicles, etc.)?
  6. Do you have any mortgages or other real estate interests?
  7. Have you ever filed Bankruptcy before?
  8. What is your job?
    1. Are you paid hourly or are you salaried, and what is this amount?
      b. How often are you paid?
    2. Do you have any alimony or child support obligations?
  9. Do you own any businesses?
  10. Are you the beneficiary of or the trustee of any trust?
  11. Are you going to receive any inheritance upon someone’s death?
  12. Are you entitled to the life insurance proceeds of anyone?
  13. Do you have any ongoing lawsuits against someone else?

The specific questions will generally vary by jurisdiction. Your attorney will go over all of the specifics with you prior to your hearing. When scheduled a 341 meeting, it is best to have an experienced bankruptcy attorney walk you through the process and represent you on the day of your meeting. Call attorney Matthew Cherney to schedule a consultation today.

How Bankruptcy Can Help With Back Taxes


If you owe back taxes (federal, state, or local), this can be a tremendous stress. Many people inquire as to whether filing bankruptcy can help deal with their tax debt. While every situation is different and needs to be assessed by a qualified bankruptcy attorney, there are ways in which a bankruptcy filing may help you with your back taxes.

If you owe money for back taxes, the IRS or State Revenue Department can garnish your wages or your bank account. Filing a bankruptcy will stop a tax garnishment. This is what is known as the automatic stay, which requires all creditors (including the taxing authorities) to immediately cease collection action. What happens to your taxes next depends on the chapter of bankruptcy you are filing.

Chapter 7 Bankruptcy

Certain taxes are dischargeable in a Chapter 7 bankruptcy. Here are the general rules regarding dischargeability of taxes in Chapter 7 Bankruptcy.

The Three-Year Rule

The tax return was due at least three years ago. Most returns are due on April 15 for the previous tax year. If the taxes were due from a return filed on April 15, 2017, they would be eligible for discharge (provided all other criteria are met) after April 15, 2020.  Do not forget to take extensions into consideration. This means that the three year rule applies to the extension date.

The Two-Year Rule

You must have filed the return at least two years before you filed your bankruptcy case. If you don’t file a return, sometimes the IRS will file one for you. Many bankruptcy courts do not consider that a return for purposes of fulfilling this rule.

The 240 Day Rule

The taxes must have been assessed at least 240 days prior to filing Chapter 7. When the taxing authority enters the liability on its records, they have “assessed” it. This doesn’t necessarily happen the minute you file your return. It could take weeks or months. In some cases, the taxing authority will audit your return and assess additional taxes years after the return is filed. This period could be tolled or extended if you filed an offer in compromise with the IRS or if you filed a bankruptcy case during that period that was discharged or dismissed.

Chapter 13 Bankruptcy

If you cannot discharge your income tax liability in Chapter 7, you can certainly treat the income tax liability in Chapter 13 Bankruptcy Plan of Reorganization. This means that you can propose to pay back the tax liability over a period of up to five years. The Chapter 13 will also stop future interest and penalties from accruing on the amount outstanding.

Your attorney will determine which taxes are and are not dischargeable in Chapter 7.