Bankruptcy Under the New Bankruptcy Abuse Prevention & Consumer Protection Act of 2005
CARROLL & HINOJOSA, PLLC is a "Debt Relief Agency;" we provide bankruptcy services to individuals and small business.
Frequently Asked Questions:
Credit Briefing
Q. What is this I hear about obtaining a credit briefing before filing a petition for bankruptcy?
A. The new code requires a credit briefing for all debtors in chapter 7 and chapter 13, which in most cases must be satisfied before a bankruptcy petition is filed. A person intent upon filing bankruptcy must, within 180 days preceding filing the bankruptcy petition, have received a credit briefing through a service approved by the United States Trustee or bankruptcy administrator that includes, at a minimum, a briefing on the opportunities for credit counseling and assistance in performing an initial budget analysis.
Q. How and where do I get this credit briefing?
A. The required credit briefing may be received in a group class, by telephone, or over the Internet.
Q. Do I receive something to show that I received the briefing?
A. Yes. The credit counseling agency will provide a certificate, which describes the services provided, and provide any debt repayment plan developed with the counselor.
Q. Suppose my home is under foreclosure and I don't have time to obtain a credit briefing before I file a petition in bankruptcy to stop the foreclosure.
A. Good question. The new code provides exceptions for bankruptcy districts in which adequate services are not available. The United States Trustee provides a list of approved credit counseling service providers. The new code also provides that a debtor need not obtain the briefing within the 180-day period where there are exigent circumstances that prevent the debtor from obtaining the briefing during the prescribed period, or during the five days after the debtor requested it.
Median Income test v. the Means test.
Q. Why are we even talking about Median income and Means testing?
A. The primary purposes of the median income test and means test are to determine whether the debtor should be in chapter 13, rather than in chapter 7 bankruptcy case. One purpose of the median income test is to determine whether the debtor must undergo the means test.
Q. What is the standard Median income?
A. The median income for your state can be found at the United States Trustee Program - Census Bureau Median Income web site.
Q. What is the difference between the Median Income test and the Means test?
A. It is easy to confuse the median income test with the means test. The median income calculation is only based on current income and household size without consideration of expenses; the means test is based on both income allowable expenses, and is used to determine the extent to which the debtor may have sufficient surplus or disposable income to pay a certain amount of the unsecured debt in a 5-year chapter 13 plan.
Q. What living expenses are included in the means test?
A. Two sets of guidelines describe permissible expenses for the means test: 1) the IRS expense guidelines (that is the Collection Financial Standards) consisting of "National Standards, Local Standards," and Other Necessary Expenses, as prescribed by the Internal Revenue Manual, and 2) the list of additional permissible actual deductions prescribed by Bankruptcy Code § 707(b)(2)(A). The bankruptcy code allowable expenses at §707 shall include reasonably necessary health insurance, disability insurance, and health savings account expenses for the debtor, the spouse of the debtor, or the dependents of the debtor.
Q. May I include payment of a favorite credit card in my living expenses?
A. No. The monthly expenses of the debtor shall not include any payments for debts.
Caveat: This Q&A text barely scratches the surface of the Reform Act portion discussed here. The median income test and means test are complicated and you should seek a competent bankruptcy attorney for advice on your specific situation if contemplating bankruptcy relief.
10/14/2005
