Mistakes to Avoid When Taking the Chapter 7 Bankruptcy Means Test: Part II


We recently discussed some common mistakes to avoid when taking the “means test” to determine your eligibility for Chapter 7 bankruptcy. We want to provide you with more information about common mistakes to avoid when taking the means test. In order to be eligible for a liquidation bankruptcy, the U.S. Courts clarify that a consumer must be able to pass the means test. However, in many cases, consumers make mistakes when taking the means test and incorrectly come to the conclusion that they are ineligible for a liquidation bankruptcy.
In Part I, we told you about three common mistakes debtors make when taking the means test. Here, we will continue that list of common errors.
Taking the Means Test When You are Not Required to do So
As we mentioned above, the means test is necessary in most cases for consumers to prove that they are eligible for Chapter 7 bankruptcy and that a liquidation bankruptcy would not be abusive. However, there are a couple of key situations in which a party filing for bankruptcy does not actually have to take the means test.
If you are a disabled veteran, you do not have to pass the means test. Furthermore, if you are filing for business bankruptcy—even if you are a sole proprietor—you do not have to take the means test. Even if you put business debt on your personal credit card, for instance, as long as you can prove that the debt is business debt, you likely will not need to pass the means test.
Doubling Deductions if You are Married but Your Spouse is Not Filing for Bankruptcy
Some people who are filing for Chapter 7 bankruptcy learn that deductions can be doubled for married couples. While this is true when both parties are filing for bankruptcy, deductions cannot be doubled if both spouses are not seeking bankruptcy protection. In other words, if Spouse 1 decides to file for bankruptcy but Spouse 2 does not join in the bankruptcy, then Spouse 1 cannot double deductions even though she or he is married.
Incorrectly Listing Child Support That Has Not Been Paid or Received
Even if there is a court order in place, child support can only be counted—either as income or as a deduction—if it is actually being received or paid. In other words, simply having a child support order in place does not matter if the court order is not being followed and the support payments are not being made.
Incorrectly Determining Your Household Size
When you are listing your household size for purposes of taking the means test, it is extremely important to correctly determine your household size. You cannot simply count the total number of people living in your home if they are not your dependents. In most cases, minor children and elderly parents for whom you are a caregiver will count as part of your household size, but other individuals living in the house—such as adult children—are less likely to count for purposes of your household size.
Contact an Oak Park Bankruptcy Lawyer
Do you need help filing for bankruptcy? An experienced bankruptcy lawyer in Oak Park can assist you. Contact the Emerson Law Firm today to speak with a consumer advocate.
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