Tag Archives: bankruptcy means test

Distinguishing Personal Debt from Business Debt

As I wrote on Monday, a Chapter 7 bankruptcy often seems to be in the best interests of many clients who are initially looking to declare a business bankruptcy. I mentioned how having mostly business debt can allow you to avoid having to take a bankruptcy means test, but determining what qualifies as personal debt and what is business debt is frequently subject to debate. It is certainly another occasion you will want to be working with a Maryland or Washington DC bankruptcy attorney. Personal debt (or consumer debt) is any debt that was accumulated primarily for personal, family or household reasons. Anything else would be considered non-consumer debt, but it is important to show what the money was used for rather than where you got the money from. Generally, personal, consumer debt typically includes: Child or Spousal support Legal fees relating to the family or household Mortgages Personal income…
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No Means Test Required for Business Owners Filing Chapter 7

With many people around the country struggling to secure employment through traditional routes, it is not uncommon for a client to come into my office after trying to start his or her own small business but unable to make it successful. Whether your business was in operation for a few days or a few decades, people need to know that filing personal bankruptcy does not discharge the business debt; it allows the business owner to discharge his or her personal obligation to pay the business debt. One of the immediate benefits of filing a Chapter 7 bankruptcy is that as long as more than half of your debt is business-related, or non-consumer debt, you will not have to concern yourself with the bankruptcy means test. The means test was created as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), intended to reduce abuse of the…
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Gentle Reminders About the Means Test

As a result of Congress passing the Bankruptcy Protection Act of 2005, most individuals must now pass the bankruptcy means test to qualify for Chapter 7. Some disabled veterans and filers who incurred most of his or her debt from operating a business may be exempt from having to complete a means test. For a majority of the other debtors seeking to file Chapter 7 bankruptcy, the first part of the means test compares his or her average monthly income for the six months before filing with his or her state’s median family income. An income less than or equal to the state median will allow him or her to file for Chapter 7, but there remains the chance that a bankruptcy trustee may later find that the debtor has enough income after paying allowable expenses to repay creditors in a Chapter 13 repayment plan. The bankruptcy means test uses a formula…
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