Your bankruptcy means test may be too high if you file your bankruptcy case in January 2012.
People with bi-weekly paychecks get 26 paychecks a year. Usually you will have 13 paychecks in the six months look-back period of the bankruptcy means test. But some people will have 14 paychecks instead of 13 for the six months of July – December 2011. If your first September paycheck was dated September 9, you will be one of those people. (It’s no problem if you got paid on September 2.)
Most people on bi-weekly pay look forward to those months with three checks. They usually come every six months. But this year, if you got paid September 9, both July and December will be three check months. (Your next three check month will be June 2012.) But in bankruptcy, good is bad. That 14th paycheck could force you into a five year Chapter 13 bankruptcy repayment plan, because your income could be just a little too high.)
Here’s one example:
Take a single parent supporting one child in Virginia making exactly $30.00 a hour, no overtime, renting, one paid for car, no medical issues, no child care. That family is means test eligible for a Chapter 7 bankruptcy, if the parent files in October 2011 or November 2011, or December 2011, or February 2012, or March 2012. But in January 2012: not eligible. Mandatory five year Chapter 13 payment plan.
This problem can be fixed with proper planning. I had to change the bankruptcy filing date for a client I met yesterday, to avoid that problem. Otherwise, it would cost him $300 per month for 60 months–an $18,000 mistake.
The 2005 Bankruptcy Reform has a lot of tricks and traps. This is one of them.