Do I have a choice between chapters
13 and 7?
Usually no. Under the "new bankruptcy law" (called
the "Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005," but referred to as BAPCPA), most debtors
are forced to go through chapter 13 (a repayment
arrangement) rather than the faster chapter 7 process.
Here's how it works:
To arrive at what your true income
is for purposes of median income and means test calculations
for bankruptcy, your gross income for each of the last
six calendar months preceding the filing is determined,
and then the average income for the six month period
of time is used. This resulting "average" figure
is then annualized (multiplied x 12) to arrive at your
income figure(s) for purposes of the bankruptcy. Each
person filing must separately set forth his or her
income and all amounts and categories of same for each
of the full six calendar months before filing, and
you must then show your current income as of the date
of filing. Note that current income figures may be
different than the income figure for the previous six
months, especially if you have just started new or
different employment after a job lay off, or if you
are otherwise making more now than in the previous
six months.
The "income" factored into the median income
calculations is:
- Gross
wages, salary, tips, bonuses, overtime, commissions
- Income
from the operation of a business (net income)
- Interest,
dividends, royalties
- Pension and retirement
- Regular contributions from
others to household expenses, including child support
- Other
sources of income not already specified (such as
lottery winnings, trust income, and the like)
If you
are over the median income for Florida, then, in
such event, the means test calculations will then
come into play in most cases, whereby IRS national
standards for housing and expenses are utilized.
After the means test is performed for your case,
your "disposable" monthly
income is calculated. If this resultant "DMI" or "disposable
monthly income" is under $109.58, then, there is no determination of "abuse",
and you may be able to file a Chapter 7 (liquidation) bankruptcy. If your disposable
monthly income figure is over $182.50, then there is a determination of "abuse",
and you may have to file a Chapter 13 bankruptcy
(repayment plan of a portion or all of your debts)
and not a Chapter 7 bankruptcy. If your disposable
monthly income, when multiplied x 60 months, is between
$6,575 and $10,950, and, if this figure is less than
25% of the total of your non-priority unsecured debts,
then, in such event, you may be able to still file
a Chapter 7 bankruptcy.
The means test calculations do not come into play
if your debts are primarily not consumer debts. Ask
your attorney about this, and be prepared to give
your attorney information on all of your debts and
the nature of your debts at your initial consultation,
if possible.
As you can see from the above explanation, the median
income and means test calculations require complete
and accurate income information from you. The calculations
are complicated and require an in-depth analysis
by the attorney and staff handling your case before
your Petition can be filed.
There are other factors involved in a determination
as to whether you can file a Chapter 7 or Chapter
13 bankruptcy, including, but not limited to, whether
or not you have filed and/or received a discharge
in a previous bankruptcy case in the last 8 years,
whether you have assets that are not "exempt" from
the claims of creditors, the nature and amount of your debts, whether you are
expecting to receive any large "windfalls" of
money, such as from an inheritance, and various other
scenarios."
