Experienced Bankruptcy Attorneys in Minnesota
Providing a bankruptcy consultation with a Minnesota bankruptcy attorney.
Serving Minneapolis • St. Paul • Edina • St. Louis Park • Bloomington • Roseville and all of Minnesota
The experienced bankruptcy attorneys at Neff Law Firm, P.A., have helped many people assess their eligibility for filing bankruptcy in Minnesota under the new bankruptcy law. These Twin Cities bankruptcy attorneys can review a debtor's financial situation with him or her and help to evaluate the potential for qualifying for bankruptcy.
Not everyone who is financially stretched automatically qualifies for bankruptcy relief under current law. The Bankruptcy Abuse Prevention and Consumer Protection Act, also known as BAPCPA and passed in 2005, established a means test to help debtors determine if they qualify for bankruptcy eligibility. The purpose of this test is also to determine who may be able to repay some of their debt and who will need many of their debts to be discharged.
However, the bankruptcy means test is not just a matter of plugging in numbers. It requires careful calculations and thorough analysis of your financial situation. Located in Edina and Roseville, Minnesota, Neff Law Firm, P.A., is a bankruptcy law firm that uses the bankruptcy means test correctly to help clients determine if they qualify for Chapter 7 bankruptcy or Chapter 13 bankruptcy. To learn more about our services, please contact us to schedule an initial consultation today.
The First Part of the Bankruptcy Means Test
The first part of the bankruptcy means test is to take your monthly income from all sources, and then determine whether any of your income might be excluded from the income calculations. Once your current monthly income (CMI) is determined, it must be compared to the median income for your area. If you meet this threshold, you are on your way to potentially passing the Chapter 7 means test and qualifying to file for Chapter 7 bankruptcy. More analysis, however, must be done to determine if there are any other issues that might impact your ability to qualify for bankruptcy and specifically which type of bankruptcy, Chapter 7 or Chapter 13, best fits your needs and your particular financial situation.
If you do not meet the median income criterion, your income may be adjusted to reflect your disposable monthly income after allowable deductions in various categories of expense. These expense deductions are formulated from published information compiled by the IRS, the Census Bureau and a wide variety of additional federal agencies. Our lawyers are knowledgeable in how to use these deductions properly to ensure your income is calculated correctly.
The Second Component of the Bankruptcy Means Test
The deductions allowed are quite detailed and are broken down by county, metropolitan areas, census regions, family size, income, number of vehicles and various other metrics. Among the allowed deductions are the following:
- Living expenses as specified under the collection standards of the IRS for debtor’s household size
- Allowed housing and utility expenses for debtor’s household size for the state and county in which debtor resides
- Ownership costs related to debtor’s vehicles (not to exceed 2 vehicles)
- Operating costs (gas, tires, oil, maintenance, registration) related to the operation of debtor’s vehicles and/or public transportation
- Deductions for federal, state and local taxes, excluding real estate and sales taxes
- Involuntary deductions required for employment: such as mandatory retirement plans, union dues, and uniforms
- Term life insurance premiums for the debtor(s) only—no other type of life insurance or persons allowed
- Court ordered payments such as alimony, child support or other domestic support obligations
- Amount actually expended for child care such as babysitting, day care, nursery and preschool (does not include expenses for education)
- Health care: $60 per person for household members under the age of 65 and $144 per person for household members 65 and over
- Average monthly amount actually expended for health and welfare of debtors or dependents that is not reimbursed by insurance or paid by a health savings account and is in excess of the allowance—provided there is adequate documentation to support the expense(s)
- Costs related to pagers, call waiting, caller ID and Internet that are necessary for the health and welfare of the debtor or debtor’s dependents
- Health and disability insurance premiums and contributions to health savings account
- Expenses incurred for the care and support of elderly, chronically ill or disabled household or member of your immediate family who is unable to pay for such expenses
- Expenses incurred for protection against family violence
- Home energy costs in excess of allowances, provided there is proper documentation and the excess amount does not exceed 5% of the allowed amount
- Education expenses for dependent children under the age of 18 that the debtor(s) actually incur not to exceed $147.92/month per eligible child—must be able to provide documentation as to the reasonableness and necessity of the expense and that it is not included elsewhere
- Actual expenses for administering a Chapter 13 plan
- 1/60th of secured debt that will become due in the five years after the filing of the bankruptcy case (each secured debt must be examined to determine whether it is for the purchase of a luxury item as such purchases may be disallowed by the bankruptcy court)
- 1/60th of amount necessary to “cure” defaults on secured debt such as home mortgage defaults and defaulted automobile or other secured loans
- 1/60th of all pre-petition priority debt such as priority tax obligations, child support or alimony claims for which you were liable at the time of the bankruptcy filing,
- Continued contributions to any tax-exempt charities in accordance with past giving not to exceed 15% of the debtor’s Schedule I gross income Form 22 currently monthly income
After applying these allowable deductions, if your disposable income exceeds just $117.08 per month then you may not qualify for a Chapter 7 bankruptcy. If your disposable income does not exceed this amount, you may pass the Chapter 7 bankruptcy means test as per the adjusted income criterion, however, you may still have to file a Chapter 7 bankruptcy if you have sufficient income after payment of your basic monthly expenses to pay something toward your debt.
If your disposable income exceeds $195.42 per month, you fail the means test and Chapter 7 bankruptcy is not a legally available option for you, however, you may qualify for Chapter 13 protection. Our attorneys may be able to help you seek Chapter 13 protection or debt relief through other measures. If your disposable income falls between $117.08 and $195.42 per month, you continue to the third and final step in the final determination process.
It should be noted that the median income, the above figures and the deductions allowed for living expenses, transportation expenses housing and utility expenses, health care, and the allowance for education related expenses for dependent children under the age of 18 are subject to periodic adjustment, which may increase or decrease the allowed amounts in any of the categories applicable to the means test.
The Third Step in the Process of Determining Bankruptcy Eligibility
The third step measures your ability to pay at least 25% of your unsecured debts in a five-year period. If you have the ability to pay at least 25% of your unsecured debt over a five year period, then you are eligible for Chapter 13 protection; filing a Chapter 7 bankruptcy when you have the ability to pay at least 25% to your unsecured creditors is presumed to be abuse of the bankruptcy laws and could result in serious consequences. It is also possible, that even if you do not have the ability to pay at least 25% to your unsecured creditors, you may still be able to file for chapter 13 bankruptcy protection in an effort to cure defaults on secured debt such as home mortgages, car loans or other secured debt for non-luxury property.
If you would like to have your finances examined to see if you qualify for the bankruptcy means test, contact us today to schedule an initial consultation. Flexible appointment times are available. We have offices in Edina and Roseville to serve the needs of people throughout the twin-cities metro area and throughout the state of Minnesota. We look forward to working with you.
Consultation with Experienced Minnesota Bankruptcy Lawyers
The experienced Minnesota bankruptcy lawyers at Neff Law Firm, P.A., have experience helping consumers evaluate their eligibility for filing bankruptcy under the new bankruptcy law. An experienced Minnesota bankruptcy attorney from the law firm is available to meet and discuss relevant facts related to a debtor's qualifications for filing bankruptcy in Minnesota. These bankruptcy lawyers can provide assistance to consumers who are considering bankruptcy. For a bankruptcy consultation, debtor's may arrange for an appointment to meet with a Minnesota bankruptcy lawyer at one of the law firm's convenient Minnesota offices by calling the central scheduling telephone number of (952) 831-6555.