Chapter 7 Bankruptcy Attorney in the Greater Augusta Area
Having difficulty keeping up with your debts? That’s one of the most common problems in the United States, and sadly, not a lot of people can find solutions to pay their debts. There are some federal laws that can help you manage them. Most people have heard or don’t know much about Chapter 7 bankruptcies but are still not sure of what it is about. In Lee Ringer Law Offices, you will get to know more about Chapter 7 bankruptcy laws and attorneys that are specialized in it.
What is Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy case sometimes goes by the official name liquidation or sometimes straight bankruptcy. The United States Trustee (UST) (a division of the Department of Justice) picks a panel trustee to administer your case. The trustee is a lawyer, usually with considerable bankruptcy experience, but is not a government or court employee.
In theory, you are supposed to turn over any non-exempt assets (if you have any) to the trustee. Then the trustee is supposed to sell your assets to a willing buyer, and divide the proceeds among your creditors in proportion to the claims that they file, as far as the money will go.
The Means Test
In order to get into Chapter 7, you also have to pass the means test. The means test is basically a math problem or formula that is supposed to measure your ability to repay your creditors. There have been hundreds of cases around the country where the judges have had to decide what Congress meant by the wording of the Bankruptcy Code, especially the means test. To oversimplify the matter, the means test, as laid out in Official Form B22, is divided into two main parts:
Current Monthly Income (CMI): In the first part of the means test (Parts II-IV of the official form), you compute the average of your income from all sources, except Social Security benefits, for the six calendar months immediately preceding the filing of your case. This calculation is called your Current Monthly Income. You compare that number with the median income for households of the same size as yours in your state. (Half of households earn more than the median, and half earn less.) The U.S. Census Bureau compiles median income numbers periodically. The latest figures can be found here. If it happens that you are below median income, Bingo! You pass the means test.
Expense Allowances: You only need to complete the second part of the means test if your CMI is above median. In the second part (Parts V-VIII of the official form), you subtract your allowable expenses from your CMI. The bottom line is called monthly disposable income. If the bottom line is less than about $125 monthly, you passed the means test, even though you are an above-median-income debtor, and can also go directly to Chapter 7. If the bottom line is above about $208 monthly, however, there is a presumption of abuse of chapter 7, i.e., you get a red light, and likely will be forced to file a five-year Chapter 13 plan UNLESS, you can show, in detail, and document special circumstances.
Unfortunately, there is no definition of special circumstances, just two examples, i.e., serious medical condition or call to active military duty. Other than that, special circumstances pretty much means whatever the bankruptcy judge thinks it means, except obviously there should be something special (unusual) about your case, to justify you not having to pay at least part of your unsecured creditors back in a five-year Chapter 13 plan. By the way, on the means test, you do NOT get to use your real expenses for most expense categories on the test. Instead, you use tables of allowances or standards mostly borrowed from the IRS collection manual used to collect back taxes from tax cheats.