BANKRUPTCY LAWYERS - BANKRUPTCY MEANS TESTING 

BANKRUPTCY MEANS TESTING - GENERALLY

 The Bankruptcy Reform Act of 2005 introduced means testing. The purpose of this change was to force high income individuals into chapter 13 bankruptcy rather than filing for chapter 7 bankruptcy.  In practice, means testing has affected very few people filing for bankruptcy.

A chapter 7 bankruptcy eliminates your unsecured debt (with some exceptions). Debts such as credit cards and medical bills are discharged and do not receive any repayment. There are exceptions to this discharge. These are debts such as taxes, student loans, child support, and other specific unique debt. To qualify for a chapter 7 discharge, your income must be either below the median income ("prong one") or below the median income after deductions for certain expenses ("prong two").  If you meet prong one, then the analysis stops and you qualify for chapter 7 bankruptcy.  In the event that you income exceeds this limits, it does not necessary mean that you do not qualify for a chapter 7. If you exceed the median income, then you receive certain deductions from your gross income for necessary expenses such as housing, food, clothing, and other deductions. These deductions are based on the number of persons in the household.

The median income (or means testing levels) for 2009 in West Michigan are as follows: 1 person - $43,123, 2 people - $51,878, 3 people - $61,798, 4 people - $74,658, 5 people - $80,390.00.  These amounts are changed twice a year.  It is important to realize that not all "income" is "income" under the means test.  For example social security, retirement, and unemployment income is not "income" under means testing.  The means testing number increases based on the number of members in the household.  This is not necessarily minors.  The court uses the term "heads on beds" which would include elderly, adult children still at home, or others that the debtor is supporting in the household.

If your income is below the median income (either prong one or prong two) you qualify for chapter 7 bankruptcy.

If you do not qualify for chapter 7 bankruptcy, than you will qualify for chapter 13 bankruptcy relief. Unlike a chapter 7 bankruptcy, in a chapter 13 bankruptcy, you pay back your creditors based on your ability to pay (not how much you owe) over a 36 to 60 month plan. It is important to realized that the creditor may only receive a small amount of the total debt owed to them or they may receive the full amount depending on the persons ability to pay (not how much is owed in total debt). A chapter 13 bankruptcy is great for someone who cannot qualify for a chapter 7, but is unable to pay their debt on their own.

 The application of the means test is evolving daily.  For specific information related to your facts and circumstances, you should consult with an attorney from our office.

BANKRUPTCY LAWYERS - GRAND RAPIDS

Krupp Law Offices P.C. represents clients facing bankruptcy throughout West Michigan, including the cities of Grand Rapids, Holland, and Grand Haven, and the counties of Kent, Ottawa, Allegan, Barry, Newaygo, Montcalm, and Ionia.

Our office can help.

KRUPP LAW OFFICES PC

161 Ottawa NW Suite 201

Grand Rapids MI 49503

616-459-6636 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it   

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