One of the most important concepts involved in consumer bankruptcy filings is the “means test.” What is it?
According to the U.S. Supreme Court in Ransom v. Fia Card Services, decided January 11, 2011,
“Chapter 13 of the Bankruptcy Code uses a statutory formula known as the “means test” to help ensure that debtors who can pay creditors do pay them. The means test instructs a debtor to determine his “disposable income”—the amount he has available to reimburse creditors—by deducting from his current monthly income “amounts reasonably necessary to be expended” for, inter alia, “maintenance or support.” 11 U. S. C. §1325(b)(2)(A)(i). For a debtor whose income is above the median for his State, the means test indentifies which expenses qualify as “amounts reasonably necessary to be expended.” As relevant here, the statute provides that “[t]he debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service .”
Please Contact a Bird & Skibell, PC attorney if you are thinking about filing for Bankruptcy under Chapters 7 or 13 in the Dallas/Fort Worth Area.
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