Posted by Sidney Diamond on Fri, Aug 28, 2009 @ 05:14 PM
The "Means Test" became law as part of the Bankruptcy Consumer Protection Act Of 2005. The test is mandated by the bankruptcy code including a long, vague and confusing explanation of exactly how to set up the test, which was left to the Office of the United States Trustee. The backbone of the test is derived from the Internal Revenue Code. The test has gone through more than a few changes as people in charge attempted to make the test fit the statute and has been subject to a number of court rulings both by the Bankruptcy Courts and the Courts of Appeal. Two (2) changes that have recently taken place are:
The Court of Appeals for the Fifth Circuit, the Appellate Court that Texas is subject to has recently ruled on whether or not a debtor is entitled to an "Ownership Expense" deduction when the vehicle is paid for. The Court ruled that a debtor is entitled to an ownership expense deduction regardless of whether or not there is a debt against the vehicle.
Is a debtor entitled to an additional deduction with a vehicle that has high mileage? Obviously a car that has low mileage costs less to operate than a vehicle with high mileage. The Office of the United States Trustee has determined that a debtor is entitled to an extra deduction for vehicles that have over 200,000 miles on them. Exactly how much of a deduction is unclear at this point and is apparently determined on a case by case basis.
The result of the foregoing is that the bar has been lowered to some extent as to whether or not a debtor can be eligible to file a Chapter 7 bankruptcy rather than a Chapter 13 bankruptcy.
Posted by Sidney Diamond on Fri, Apr 10, 2009 @ 10:46 AM
If you have lived in Texas two (2) years prior to the date you filed your Chapter 7 bankruptcy (or plan on filing) you are entitled to use Texas Law to determine what property you get to keep. That means you may either use the property that is "exempt (free to keep)" from bankruptcy under the Texas State Statute or you may choose to use the Federal Exemption Laws. Which law you use is up to the person(s) filing Chapter 7, which means you get to choose the statute (Texas State or Federal) that gives you the most benefit. For most people this generally means you get to keep everything you have, with few exceptions.
Which law is most advantageous depends on whether or not you own a home and how much equity you have in your home. Equity is determined by the difference between what you owe on the house and how much the house is worth. If your house has a lot of equity one usually finds the Texas Statute gives a person the biggest relief. While Texas Law protects most things it does not protect cash, cash in banks or income tax refunds. Federal Law on the other hand would allow you to apply the "wild card". The "Wild Card" under federal exemptions is exactly the same concept as the wild card used in a poker game - it is any card you want it to be. In a bankruptcy case, it can be used to exempt from the bankruptcy anything that the debtor wants to keep that is not otherwise exempt. The 'Wild Card' is contained in Section 5 of the Federal Statute.
The exemption laws are designed to allow people to keep enough of their property to have a "fresh start", not to strip them of their assets or dignity.
Click on these links to see an outline of the Texas Exemption Code and an outline of the Federal Exemption Code.
The fate of your property not protected by either statute (Texas or Federal) is in the hands of the Chapter 7 Trustee. The Chapter 7 Trustee is only going to take things he can turn into a relatively large amount of cash quickly which he can then use to pay your creditors.
6. What property will I get to keep?
Posted by Sidney Diamond on Tue, Mar 17, 2009 @ 08:11 AM
The "Means Test" is part of the bankruptcy code which determines if you qualify for a Chapter 7 or a Chapter 13 Bankruptcy. A Chapter 13 Bankruptcy also determines your disposable income. Disposable Income is the amount of money you have to pay out of your monthly income to the Chapter 13 Trustee which in turn gets distributed to your unsecured creditors.
On Sunday all of the numbers in the Means Test will be revised upward. Because the average median income will rise, it will be easier to qualify for a Chapter 7 bankruptcy (which is the first part of the Means Test). If you do not qualify for Chapter 7 because of your average median income you may still qualify for Chapter 7, depending on the result of the second part of this Test. These figures will also increase on Sunday. Visit our resources page for links to these revised tables.