Under the 2005 statute, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005(BAPCPA), all the factors which applied before still apply as to whether you qualify for Chapter 7. This includes the requirement that your actual income compared to your actual expenses leaves no room for a payment under a Chapter 13 plan. However, added to that is a difficult means test that many have trouble satisfying. The good news, however, is that:
The means test applies only to consumer bankruptcies. If your debts are primarily business in nature, the means test provisions don't apply to you. Your debts are "primarily business" if more than half of your debt, going literally by how much you owe, was incurred in connection with self-employment or in connection with a business enterprise. In calculating the percentage of business debt, student loans, home mortgages and automobile loans are ordinarily considered to be consumer debts. This makes it hard to classify most cases as primarily business, even when the failure of a business is the reason for the need to file bankruptcy.
Assuming we are talking about debts which are primarily consumer debts, the means test will not be applied to anyone who has an income, based on number of people in the household, below the median for the state in which they live. So one of the first questions is, where is your income compared to the median.
Here are the median income numbers as provided by the U.S. Trustee's office for residents of Minnesota. These are usually updated about every six months. The following figures are from the November 1, 2014 update, based on data from the U.S. Census Bureau. This time the median income figures for all family sizes in Minnesota went up. This should help make a few more people eligible to file.
|1 Person||2 People||3 People||4 People||5 People||6 People||7 People|
Add $8,100 for each individual in excess of 7.
If the income for your household is below those shown in this table, in most cases you should be able to file Chapter 7 without worrying about the means test. If you have a household income above the median, you may be able to pass the means test as long as you are not too far above the median. The means test involves complicated calculations, based in part on the actual facts of the case and based in part on IRS and Census Bureau statistics. It takes the best software available, together with the judgment of a good lawyer, to get the numbers right. It's not unusual for the United States Trustee's office to dispute the calculations, particularly since the rules or the interpretation of the rules are undergoing constant change. Under no circumstances should you try to do the means test calculations by yourself.
Short Video - Filing Chapter 7 Bankruptcy in Minnesota
Here's me carrying on about filing Chapter 7 Bankruptcy in Minnesota. I hope you find it informative. It's about ten minutes long and was shot at my previioius office, before I moved to where I am now near Ridgedale.
What is Chapter 7 Bankruptcy?
This is the kind of bankruptcy which is the usually first choice of individuals who are in serious financial difficulty. It is very well suited to consumer debts, but often works well for self-employed individuals and small businesses too. It is commonly called a "straight" bankruptcy, and is also often referred to as a "liquidation." The bankruptcy court appoints a trustee who reviews what assets the debtor has available for distribution to creditors. Those would be only the assets that the debtor is unable to claim as exempt. If some assets are available, the creditors are notified. Those who submit claim forms will be given their proportionate share of the available assets, but that is ordinarily all they are going to receive.
Most assets which are basic necessities of life are exempt from seizure by the trustee either under federal or state statutes, and a skillful bankruptcy lawyer can help most clients claim almost everything they own as exempt. If there is some large asset which is not going to be exempt, the Chapter 7 bankruptcy may be a bad idea. One of the other types of bankruptcy such as a Chapter 13 wage earner plan may be more helpful. The most important task for the lawyer in a Chapter 7 bankruptcy is to make sure that the assets are protected under the exemptions to the greatest extent possible. That brings us to the next question.
The Bankruptcy Discharge
If a debt has been incurred through fraud or a number of other really nasty forms of conduct, such as injuring someone by drunk driving, the creditor may have grounds to file an objection. If no such objections are filed, the next step is that the bankruptcy court issues an order called a "Discharge" which states that the debts are gone, and orders the creditors to leave the debtor alone. Unlike the probate court example, the bankrupt person gets to start over again in this life free of the past financial problems. It's a fresh art, and the improvement in some debtors' circumstances can be almost like magic.
The Credit Counseling Requirement
Prior to filing of either a Chapter 7 or a Chapter 13, a certificate of completion of an informational consumer credit counseling program is required. Here is a link to the list of the providers that have been approved for this program. One good place to go is Family Means, which has an office just down the street from my office.
The fastest and easiest way to complete the programs may be to sign up at a web site where it can be done on line and over the telephone. There are quite a few of these. My favorite on line service has been the Debt Education and Certification Foundation. They call themselves "DECAF" and operate with a headquarters in or near Dallas, Texas. Since it's on line, of course, we don't care where they are. All we care about is that their program is approved by the Justice Department for Bankruptcy filings in Minnesota. The fee is usually about $40 per course if your lawyer registers you for the course; otherwise it's a bit more. Plan on spending about two hours in total doing the on line and the over the telephone portions of the course. You don't have to do it all at once. You can do a little at a time at your own pace. DECAF is open 24 hours a day, seven days a week. There's no room here for excuses about not being able to f ind a good time to get it done.
Kelly Law Office
11900 Wayzata Blvd. #116E
Minnetonka, MN 55305
Across I-394 from Ridgedale. Serving the entire Minneapolis and St. Paul area, with easy access from the western suburbs including Minnetonka, St. Louis Park, Golden Valley, Hopkins, Eden Prairie, Maple Grove, St. Michael, Waconia, and Plymouth.