Hi. I’m Mike Greiner. I’m an attorney with the Financial Law Group here located in Warren and we specialize in bankruptcy law here at the financial law group. Our phone number is 586-693-2000. Our website is financiallawgroup.com. And I’m here to talk to you today about the means test for bankruptcy.  A lot of people are concerned that since the change in the law a few years ago, that they might not be eligible for chapter 7 bankruptcy anymore. And what I’ve found is that most people that come into my office who are concerned about that, are actually eligible for chapter 7 bankruptcy. In fact, right before the law changed there was a big rush by people to file bankruptcy thinking that they wouldn’t be able to file bankruptcy after the law changed and really, for most of those people, they could have easily filed Chapter 7 bankruptcy.

The requirements for income for your household size are actually quite high and most people who would be eligible for chapter 7 bankruptcy because of the fact that they have a lot of debt would still be eligible for chapter 7 bankruptcy under the, under thee change in the law. The big change in the law was the means test. The means test only applies if most of your debts are related to your consumer affairs as opposed to business affairs. So if you’re a business person and you’ve accumulated a lot of debt related to your business affairs then to start with, the means test doesn’t even apply to you so you don’t even have to worry about it from that point.

Then what happens is the means test looks at the average household income for you.  Your household is the total size of all the dependents that you’ve got living with you. Just because someone’s not a dependent for tax purposes doesn’t mean they’re not a dependent for bankruptcy purposes. So, say you’ve got a son or daughter who’s 25 years old, living with you. That person might not be someone you can claim on your taxes as a dependent, but may still for all practical purposes be a dependent of yours. And so, as a result, the courts have ruled that they could be dependent for bankruptcy purposes. So that also helps expand the size of your household.

Similar situation could be an elderly relative who’s living with you may only receive Social Security. Then what you do is you take a look at all the household sources of income and add them together for the last 6 months and divide that by 6. You come up with an average monthly income over the last 6 months and then that amount gets compared to the average household income for a family the size of your household in Michigan. And you should know in terms of income certain types of income are excluded from this. For example Social Security income, anything related to the Social Security Act and that includes for example unemployment compensation. Those are not considered income for the purposes of the means test. So again that could be something else that makes you eligible for the means test where you might not have thought you were eligible for it. Then if your higher than the average household income for family or size in Michigan, then you continue on. You can take certain deductions, to see if those deductions make it so your eligible. So say for example, if you have high child care costs. If you have to pay child support or alimony. If you have a higher mortgage payment, often times that can make it so you’re eligible for chapter 7 bankruptcy, where you might have been in the past. Also, you can take deductions for charitable contributions you make. If you make regular charitable contributions, to church. Say for example, a lot of my clients have tithed. And for them, that would be the type of thing that would be a deduction that you can take on the Means test.

I’ve also had clients who have union dues, or large deductions for insurance- health insurance, for example, or even disability insurance. Those would be deductions you can take. Life insurance, term life insurance would be a deduction you can take. So, you can see there are a lot of deductions that you can take that might be able to make you eligible for Chapter 7 bankruptcy, where you might not have been eligible for Chapter 7 bankruptcy in the first place.

My suggestion is come into my office. Give us a call 586-693-2000. I’ll be happy to sit down with you and look at all your sources of income. And talk with you about your situation and see if you are eligible for Chapter 7 bankruptcy. But don’t just assume. Because of the fact that if you look at the kind of income you have coming into your household that’s more than you thought would make you eligible for chapter 7 bankruptcy, don’t assume that your automatically ineligible, cause there could be ways working through the means test, that you would become eligible and certainly worth taking the time to look at.