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The Means Test and Chapter 11 Bankruptcy

Posted By admin || 30-Apr-2010

Means Test - Disposable Income

Chapter 11 Bankruptcy Means Test



One of the benefits of filing Chapter 11 bankruptcy is that the debtor's disposable income is not calculated using the Means Test , the same test which is required for Chapter 13 bankruptcy .  Arguably, the biggest change to the bankruptcy code was the incorporation of the Means Test for Chapter 13 bankruptcy debtors.

In Chapter 13 bankruptcy, the Means Test is used to determine how much disposable income a debtor has; however because the means test may not accurately reflect the debtor's true expenses, the disposable income calculation  may often be inaccurate. Fortunately for debtors filing Chapter 11 bankruptcy disposable income is calculated by the bankruptcy judge.

One of the biggest concerns of proponents of bankruptcy reform in 2005 was that they believed there were many debtors taking advantage of the bankruptcy system. According to some of these bankruptcy reform backers, many debtors were discharging debts that they may have been able to afford to repay.  As a result, the Means Test was incorporated into Chapter 13 bankruptcy.

However, one of the drawbacks of the means test is that there are limits on how much of an expense a Chapter 13 bankruptcy debtor can have. Chapter 13 bankruptcy debtors cannot have what would be considered an unreasonable amount of expenses. For example, a single debtor may not be allowed to keep the expense for two cars.  Or, a married couple filing Chapter 13 bankruptcy may not be allowed to keep an expense for two homes.

Also, some creditors may challenge certain expenses for Chapter 13 bankruptcy debtors; but with the help of an experienced bankruptcy attorney Chapter 13 bankruptcy debtors may successfully fight creditor disputes about their expenses. However, for Chapter 11 bankruptcy debtors the bankruptcy judge can use his/her discretion in determined if expenses are reasonable or not.

Have Any Chapter 11 Bankruptcy Questions?



If you have any questions about chapter 11 bankruptcy don't hesitate to let us know. Simply call us or fill out our contact form to submit questions or to set up a free consultation.

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