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You Passed The Means Test — Not So Fast!

Because your current monthly income (CMI) is based upon your present income — and not the income when you filed for bankruptcy — you may pass a means test. However, your actual income when compared to your actual expenses equates to a surplus in funds every month. Therefore, a Chapter 7 bankruptcy filing could be denied by the trustee on the grounds that the surplus income every month could support a Chapter 13 program. Contact a skilled bankruptcy attorney to help determine whether this scenario is applicable to your case.

Abusing the code

Under §707(b) of the U.S. Bankruptcy Code a court may dismiss or convert a case if there is a finding of “abuse under all the circumstances,” which is based upon your actual income and expenses, as opposed to your CMI. If an individual has an excessively expensive car or house payment for an individual filing for Chapter 7, and the judge rules these expenses could provide funding under a Chapter 13 plan, then, with an individual’s consent, one’s case may be converted. 

In addition, under 11 U.S.C. §707(b)(3), if the court determines you filed in bad faith, a judge can dismiss your bankruptcy. Although the U.S. Bankruptcy Code does not define bad faith, the courts consider a host of factors in light of the “totality of the circumstances,” which include:

  • Conduct of the debtor prior to filing for bankruptcy; transfer or hide assets prior to filing
  • Debtors motivation for filing
  • Honesty of the debtor
  • Debtor abusing the process

The Bankruptcy Abuse Prevention and Consumer Protect Act of 2005 provides several mechanisms to limit bad faith. An experienced consumer bankruptcy attorney can help clients avoid case dismissal. 

Obtain assistance from a qualified New York bankruptcy attorney

By retaining Mark E. Cohen, Esq., you can acquire information from an experienced lawyer who is dedicated to providing support during this traumatic time. The Forest Hills office represents clients throughout New York City who have financial issues and are considering bankruptcy.

 

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