Taking the Mystery and Mean Away From the Bankruptcy Means Test

Means Test and Chapter 7 Bankruptcy

It Has Never Been Easier to Determine Whether You Qualify for Relief Under Chapter 7 of the United States Bankruptcy Code in Pittsburgh.

Means TestIn 2005, Congress put in place very substantial changes to the United States Bankruptcy Code through an amendment known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).  The BAPCPA amendments set new requirements for eligibility to be a debtor under chapter 7 of the Bankruptcy Code and to receive a discharge under chapter 7.  Importantly, debtors must now undergo a means test if their income exceeds the then-applicable median income for consumers of debtors’ household size in the state in which they reside.

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Eligibility for Chapter 7 Bankruptcy – Median Income Analysis

Debtors whose income does not exceed the relevant median income need not undergo further means testing.  Median incomes information is calculated and published by the United States Census Bureau and median income data is adjusted periodically.  The Office of the United States Trustee publishes median income information on its website.  As of the date of this entry, the median income applicable to debtors in the Commonwealth of Pennsylvania with a household size of one is $50,501.  A household of two in Pennsylvania can earn up to $60,508 without further means test analysis.  A three-person family in Pennsylvania has a median income of $74,083.  With four people the Pennsylvania median income is $89,690 and increases by $8,400 for each additional member of the household.
Median Household Income in the United States: 2015

[Source: U.S. Census Bureau]

The Bankruptcy Means Test Exception Applicable to People with Primarily Business Debts

Individuals whose debts are primarily business debts are excused from the means testing analysis.  The means test analysis under section 707(b) of the Bankruptcy Code applies to individual debtors whose debts are primarily consumer debts.  A Pittsburgh bankruptcy lawyer will be able to help you make the determination of whether your debts are primarily consumer debts or whether you may be exempt from further means testing because of the primary nature of your indebtedness.

The Chapter 7 Means Test and the Presumption of Abuse

The chapter 7 bankruptcy means test is codified in section 707 of the Bankruptcy Code and individual chapter 7 bankruptcy debtors in Pittsburgh and throughout the United States must submit an Official Form 122A-1, Chapter 7 Statement of Your Current Monthly Income.  Debtors must disclose information relevant to their income and household size to determine whether they need to complete the means test.  The means test itself is incorporated into Official Form 122A-2, Chapter 7 Means Test Calculation.  Debtors must draw income data for the means test from the income during the six-month period preceding the filing of their bankruptcy cases.  The Bankruptcy Code permits debtors to subtract from their household any portion of the income of a non-filing spouse that is not dedicated to the payment of household expenses or expenses of debtors’ dependents.  The means test also provides that certain expenses be deducted from a debtor’s adjusted current monthly income to determine monthly disposable income.  That monthly disposable income is then multiplied by 60 to determine a debtor’s five-year disposable income.  If a debtor’s disposable income over five years is less than a certain threshold value (currently $7,700), then the presumption of abuse does not arise.  If the five-year income exceeds the threshold value and a cap value (currently $12,850), then the presumption of abuse arises but the debtor may still elect to complete a statement of special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.  A showing of special circumstances may justify continued eligibility for relief under chapter 7.  If a debtor’s five-year disposable income is between the threshold and cap values, the presumption of abuse will not arise unless the five-year disposable income is at least 25% of the debtor’s total nonpriority unsecured debt.

Close Call on the Means Test?  Discuss it with a Pittsburgh Bankruptcy Lawyer!

The increase in the administrative cost and duration of a chapter 13 bankruptcy case from a chapter 7 bankruptcy case is considerable.  In many cases a chapter 13 bankruptcy may be warranted but for other individuals a fresh start under chapter 7 of the Bankruptcy Code will offer the optimal path away from financial distress.  A free consultation with a Pittsburgh bankruptcy attorney could help you understand all of your bankruptcy nonbankruptcy options before making any decision.

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Bankruptcy in Pittsburgh – I Want to Keep My Car!

File Bankruptcy and Keep the Car

bankruptcy keep my carCan I File Bankruptcy and Still Keep My Car – Talk to a Pittsburgh Bankruptcy Lawyer Now!

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If you’re considering filing a voluntary bankruptcy case under chapter 7 of the Bankruptcy Code or entering into a repayment plan under chapter 13, you may be interested to know how a bankruptcy case might affect your vehicle loan.  Most workers need their vehicles just to bring themselves to work and back.  In most Pittsburgh bankruptcy cases, people can file bankruptcy and keep their cars.  Generally, as long as one continues to pay on his or her vehicle, she may retain it.

Chapter 13 Bankruptcy.  If you’re behind on your car payment, you may wish to use chapter 13 to retain that vehicle.  Under chapter 13, debtors may pay into a plan over a period of three to five years and, during that time, they may cure and reinstate certain loan balances.  In most cases, even when a debtor is substantially behind on a vehicle payment, chapter 13 may still offer a pathway to keep that car.

Chapter 7 Bankruptcy.  Often debtors are not in a position to repay creditors but still want to keep their automobiles.  In those cases, they may usually retain them as long as they keep current on their vehicle payments.   Particularly in this context, its very important to know whether creditors are secured or unsecured and whether they may have priority claim status.  In order to ensure that you are able to retain your interest in your vehicle, contact Robleto Law today.

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We are a debt relief agency.  We help people file for relief under the United States Bankruptcy Code.  (c) 2017 Robleto Law PLLC  |  Pittsburgh Bankruptcy Law Firm

 

Bankruptcy May Help Get Your Repossessed Vehicle Back

Was Your Vehicle Repossessed in Pittsburgh Before You Were Able to File for Bankruptcy Relief?

Making ends meet in tough times can be difficult enough even before your vehicle is repossessed.  Without your vehicle, you may find it difficult to get to work or a job interview making your troubled financial condition even worse.  If you have experienced a vehicle repossession in Pittsburgh, you may be able to get your car back for good by filing a voluntary petition for relief under the United States Bankruptcy Code.

car repossession

How Vehicle Repossession Works

Vehicle sales in Pennsylvania are typically financed through a retail sales installment contract.  That contract provides the lender with a security interest in the automobile until the loan is paid off.  If a borrower cannot or does not pay regular monthly payments and falls behind, the lender may exercise the legal right to take possession of their collateral and sell it.  Under the Uniform Commercial Code, lenders are required to send notices to borrowers following repossession, advising them of the disposition of the vehicle and what the borrower must do in order to get the vehicle back.  Borrowers may have the right to cure their loans meaning bring the loan current by paying the current and past due amounts owed along with the costs of repossession.  Other borrowers may find that the only rights listed in the notice they received from their lender is a right to redeem the vehicle meaning payment of the entire amount still owed to the lender.

If the lender sells a repossessed vehicle, it must send the borrower a second notice with information about the sale and whether there was a surplus or if the borrower owes a deficiency to the lender.  The form and content of the notices issued by the lender are very important and the failure of a lender to provide notices as mandated by the statute can give rise to a claim for damages against the lender.

Getting Your Repossessed Automobile Back After Filing Bankruptcy

Vehicle lenders are often familiar with the bankruptcy process and will make arrangements with your bankruptcy lawyer for the prompt return of your vehicle.  In certain cases, your bankruptcy lawyer may need to petition the bankruptcy court for the turnover of your vehicle to you.  You will still be required to pay the amounts due to your lender but you may be able to do that over a period of three to five years in a case under chapter 13.  Additionally, in certain circumstances, you may be able to “cramdown” on lender in a case under chapter 13 and compel it to accept only the value of the vehicle even if you owe considerably more than the vehicle is worth.  In a case under chapter 7, you may also be able to redeem your vehicle for less than the amount you owe.  In Pittsburgh, your bankruptcy lawyer may be able to arrange for you to receive a loan for the value of the vehicle that could save you a considerable amount of money, giving you even more freedom to make the most of your fresh start.

Talk to Your Pittsburgh Bankruptcy Lawyer to Determine if You Can Get Your Repossessed Vehicle Back by Filing a Bankruptcy Case

Whether you can get your vehicle back by filing a bankruptcy case may depend on several factors.  Timing is very important.  The filing of your bankruptcy case will give rise to the “automatic stay” which will prevent the lender from selling your vehicle.  However, if you file your bankruptcy case after your lender has sold your vehicle, you may find that you will be unable to get it back.  If your car is repossessed in Pittsburgh, you should call an experienced bankruptcy lawyer immediately.  Give yourself the best chance to get a fresh start and get back on your feet.  Expert bankruptcy professionals may be able to help you get your car back quickly through a bankruptcy case.

Saving Your Home With Chapter 13 Bankruptcy

Chapter 13 bankruptcy puts a stop to foreclosureConsumer Reorganization Through Chapter 13

If you are behind on your mortgage payments, filing a chapter 13 bankruptcy may help you avoid foreclosure.  If you are behind on payments to the point where a foreclosure complaint has already been filed by your lender, filing a bankruptcy case will immediately halt it.  The moment a bankruptcy case is filed, something called the automatic stay is put into effect.  The automatic stay is a powerful provision of the Bankruptcy Code which prevents any creditor or party-in-interest from continuing litigation against you or depriving you of your property.

Chapter 13 bankruptcy also helps you repay your past due mortgage payments.  Often, once you are several months behind on mortgage payments, you lender may refuse to accept any payment less than the total amount of the arrearages plus penalties and interest as payment, and consider the payment of a single mortgage payment a partial payment.  This perpetuates the vicious cycle.  A chapter 13 bankruptcy case allows you to pay off any arrearages over a three or five year time period – making catching up far more manageable.  Often times, chapter 13 bankruptcy is the only practical option for those substantially behind on their mortgage payments.

There are other solutions for debtors with no other problematic and significant debt beyond mortgage arrearages.  Mortgage modification, an arrangement to mitigate the lender’s loss and lower your monthly mortgage payments, can serve as a solution as well.  Modification is a negotiation and loan restructuring process which back loads your mortgage arrearages and sometimes (though not always) lowers your monthly mortgage payment.  This process often extends the term of your loan allowing your even greater advantages than might otherwise be available in a chapter 13 case limited to five years.

If you are behind on your mortgage payments and have mortgage arrearages  in excess of what you can pay back, give us a call for a free consultation to discuss a solution based on your individual goals and problems with debt.

The History of Bankruptcy

Despite the somewhat negative connotations that some people associate with bankruptcy, this type of consumer protection has been in existence since at least the time of the Greeks. This indicates that societies have nearly always recognized that sometimes, the best choice for the individual and for the community is to declare bankruptcy and start over with a “clean slate.” The following is a brief account of the history of bankruptcy; an approximate time span of nearly 4,000 years.

Bankruptcy among the Greeks

When Greece was the world’s leading military power and cultural center, only men could become debtors. But when a man became insolvent and could no longer pay his debts, he could be forced into indentured servitude for years in order to repay his debts – often under deplorable conditions.

However, because women, children and slaves were considered the property of men, they could also be sold into slavery or indentured servitude. This means that going bankrupt could literally cost a man his entire life including his family.

Bankruptcy among Romans

Two thousand years later the term bankruptcy is theorized to have been born in the form of its earliest Latin ancestor for the words “broken bench.” During this time, lenders often operated from a public bench that would be broken in the event the lender went bankrupt. This is the equivalent of a modern “out of business” sign.

Unfortunately, Romans often jailed or tortured people who were unable to pay their debts, and many were sold into slavery or traded for property, cash, influence or power.

Spain’s National Bankruptcy

Spain became the first country to officially go bankrupt. This occurred under the rule of Phillip II as he presided over one of the darkest periods in human history: the Spanish Inquisition. The Inquisition brought in a lot of money, but it was also hemorrhaging money as well, and with Phillip’s blundering expansionist nature, it wasn’t long until the entire country was overextended and unable to repay its debts, declaring a series of bankruptcies in the middle of the sixteenth century.

Other countries would follow over the next two hundred years, including France and Russia. (Wikipedia entry for Sovereign Default. Accessed 07/20/2012)

Bankruptcy in Early America

The Revolutionary War bankrupted the newly founded America, but the country quickly recovered and for many years thereafter took a dim view to bankruptcy. Consumers and businesses that went broke were often subject to ridicule and even criminal charges and jail time.

1898 Bankruptcy Act

Numerous bankruptcy laws and acts were passed between the end of the 1700’s and 1898, when corporations were officially extended bankruptcy protections and the basis for most modern bankruptcy laws were put into place by congress.

Bankruptcy Act of 1938

This Act expanded significantly upon the 1898 Act, most importantly improving the voluntary status of petitioners and the appointment of trustees to handle bankruptcy cases.

1978 Bankruptcy Reform
This Act made bankruptcy far more attractive to people and businesses struggling with debt. The Act spelled out the numerous bankruptcy types that we know today, including Chapter 7 liquidation and Chapter 13 reorganization – the two most common types of bankruptcy.

A lot has changed with bankruptcy over the years, but one thing that hasn’t changed is the fact that if you’re drowning in debt and you need help, bankruptcy may be the right choice for you. Find out for yourself right now with an immediate, free consultation from an expert with our Pittsburgh Bankruptcy Firm. Call the number at the top of your screen and learn more about taking advantage of consumer protections that were set aside to help people in financial distress. Don’t wait – make the call now.

Fewer US Bankruptcies after the Affordable Care Act? Probably Not.

Speculation abounds that the Affordable Care Act – commonly referred to as Obamacare – will have a significant impact on the number of bankruptcies in the United States. Many experts think that as a result of healthcare being more affordable and accessible, fewer people will declare bankruptcy as a result of medical bills. However, the issue isn’t as clear cut in this regard as it may seem, and there’s compelling evidence to suggest that the ACA will have little to no impact whatsoever on the number of bankruptcy filings.

The Affordable Care Act is speculated to reduce the number of bankruptcies because it will significantly lower the total medical debt of many people. The Act is theorized to accomplish this feat via the following provisions:

*Medicaid is to be expanded at the state level, offering more people care at higher income levels

*People at certain income levels will have their health insurance costs subsidized by the federal government

*The same rates will be available to people regardless of age and location. The same coverage will also be available

*More people will be able to get approved for coverage despite pre-existing conditions

All of these benefits will reduce the rate of bankruptcy filings because they will reduce the amount of medical debt that many Americans are saddled with. In thousands of cases filers often quote medical bills as being a primary reason for declaring bankruptcy. In fact, a 2007 research study published in the American Journal of Medicine stated:

“Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills.” (1)

So at first glance it’s easy to see why some people might rush to the easy conclusion that the Affordable Care Act will alleviate a large number of bankruptcies considering that the number one cause of filings is related to overwhelming medical bills. However, this doesn’t appear to be the case, and the very same study offers up its own evidence to the contrary.

In direct continuation from the above referenced passage:

“Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance.”

In reality, the study tells us that even though medical bills were cited as the primary cause of bankruptcy, 75% of those who filed already had medical insurance. Therefore, it’s not exactly prudent to argue that the ACA will reduce the US bankruptcy burden. In fact, the issue seems to go much deeper than just medical bills. And considering that people who could not afford healthcare before won’t be in much of an improved position to afford it now, it’s difficult to imagine exactly how the ACA is going to affect bankruptcy filings in the years to come.

However, the effects of the Act won’t be seen for some time, and before they can be reasonably measured it’s possible that the Act will be repealed or drastically revised. In the meantime, bankruptcy remains a powerful consumer protection regardless of the types of debts involved.

To learn more about your personal financial options and to find out if bankruptcy or reorganization is right for you, call the number at the top of your screen now for an immediate bankruptcy consultation, or use our simple contact form and we’ll get back to you straight away.

 

 

(1) David U. Himmelstein, MD, Deborah Thorne, PhD, Elizabeth Warren, JD, Steffie Woolhandler, MD, MPH, Department of Medicine, Cambridge Hospital/Harvard Medical School, Cambridge, Mass;Department of Sociology, Ohio University, Athens; and Harvard Law School, Cambridge, Mass. Medical Bankruptcy in the United States, 2007: Results of a National Study

Debt Lawyer in Pittsburgh

How do you stop all of the calls from obnoxious creditors once and for all? There’s no need for a new telephone number. Call a qualified debt attorney in Pittsburgh today. We will not charge you a fee for a no nonsense conversation. We are lawyers; we are not a bankruptcy mill and we are not interested in selling you a product that is not a good fit for you. We consider your present financial position and future goals.

We will discuss your debt and your expectations. Are you looking to buy a house in the next year or save the home you live in now? Do you owe more on your car than it’s worth or need to replace it but aren’t sure whether you can? Talk to a Pittsburgh bankruptcy lawyer.

We stop creditors calls. We stop foreclosures. We stop law suits. We help you discharge most unsecured debt obligations. We help you get a fresh start.

Credit Card Debt

The ease and convenience of credit cards is undeniable. However, quick access to credit often becomes a pathway to burdensome debt. Sometimes this is the result of frivolous spending. Many people continue to finance that two dollar, late night Taco Bell feast during college, many years after graduation. For others, a medical emergency or loss of income forced them to rely upon credit cards to live.

If your credit card debt is becoming unmanageable, it’s time to consider options other than continuing to blindly pay your monthly minimum. Consider how much better off you would be if you did not have to spend hundreds of dollars each month on credit card payments. If your financial condition would be drastically improved without your credit card debt then you owe it to yourself and your family to contact an insolvency expert. A bankruptcy attorney can evaluate your unique financial condition and determine what course of action is most appropriate for you. Whether a debt-workout plan, bankruptcy filing or some other action is most suited for you, contacting a professional for a free consultation could be one of the most rewarding calls you will ever make.