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Bankruptcy in Brief              a service of the Moran Law Group

 

Will I be allowed to file bankruptcy if my income is high?

Bankruptcy now includes a "means test" which is intended to provide a more objective approach to the issue of a debtor's ability to pay. Prior to the 2005 amendments, the trustee could ask the judge to dismiss a case because the debtor's income was so high that to permit the debtor to discharge his debts in Chapter 7 was a "substantial abuse" of the bankruptcy system. Now, the means tests purports to provide uniformity to the process and lowers the standard to simple "abuse". S 707(b)(2).

The means test calculation is found in Form B 22, now a part of every individual's CHapter 7 filing.

The United States Trustee or the Chapter 7 trustee can seek to have a debtor's case dismissed for "abuse" if the debtor's income, including that of a non-filing spouse, is sufficient to repay a significant portion of the scheduled debts.  11 U.S.C. 707(b). The real expectation is that debtors who are challenged in this way will convert their case to Chapter 13.

The law on this subject is not well developed and the attitudes of trustees and judges about what is "abusive"  varies from district to district.  

This concept does not apply to Chapter 7 debtors whose debts are primarily business debts, tax debt, or to those filing Chapter 13.

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