Bankruptcy Means Test Success for John and Sandy.
John and Sandy just got their Chapter 7 discharge, even though they are making $1100 a month more than the median income.
This family of six was able to get a Chapter 7 discharge, even though the family income was over the median.
John and Sandy are carrying a big load. They have three children at home, and Sandy’s mother is living with them. Still, under the first part of the means test, they’re not eligible for Chapter 7. Why? The median income for their family size is $163,000 here in Virginia, and they’re making $176,000.
What’s the second part of the means test?
The second part of the means test asks this question: Can you show why you’re still broke even though you’re over the median income?
When you answer that question, some of the numbers are fixed by federal regulation. You can’t budget food or clothing allowance expenses more than what the form allows. But other lines on the means test pick up what your actual expenses are.
They had:
- child support
- child care
- high car tax
- life insurance
They also had a very high house payment and very low car payments. The way the math works, both of those helped them. Besides her mom living with the family, he was also sending help to his elderly mom. (People are often afraid to budget helping elderiies. It’s allowed under 11 USC 707(b)(20(A)(ii)(II))
All those factors were enough to be able to get them approved for a Chapter 7 bankruptcy.
Some people don’t understand what the means test is about.
Some people think if you’re over the median income, you’ve automatically failed the means test. That’s wrong. If you’re over the median, then the second half of the means test kicks in.
How John and Sandy Passed the Means Test
I had three meetings with John and Sandy before I was sure that we would be able to get them approved and get them a Chapter 7 discharge. For people over the median, getting approved for Chapter 7, passing the means test, requires careful, detailed work by both the client and the lawyer. John and Sandy thought long and hard about their budget, got me the information I need, and together we were able to get it done.
Conclusion
For John and Sandy, we were able to get a Chapter 7 discharge and clear more than 175,000 in credit cards and personal loans.
Fifteen years ago, I first wrote about how big families can pass the means test.
PS This is a real example
But I don’t use real names or real pictures.