Bankruptcy

Say What? The Means Test, in Plain English

Credit to the Georgia Bankruptcy Blog for spotting this terrific article which explains the “means test,” a troublesome and controversial feature of the BAPCPA amendments which now determines who gets to file Chapter 7 (”straight” or liquidation bankruptcy) and who will be steered (notwithstanding their preferences or what’s actually best for the particular debtor) into Chapter 13’s payment plan provisions.

Why is the means test so important for debtors to understand in evaluating whether bankruptcy is appropriate? As the article explains:

Prior to the advent of the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” the most common reason for someone to file under Chapter 13 was to avoid the loss of equity in their home or other property. And while equity protection will continue to be a big reason for people to choose Chapter 13 over Chapter 7, the new rules will force many people to file under Chapter 13 even if they have NO equity. That’s because the means test will take into account the debtor’s income level.

© 2006 SC Bankruptcy & Consumer Law Blog.