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The Ins and Outs of Income Testing for Chapter 7 Bankruptcy

If you are looking to file for Chapter 7 bankruptcy, one of the things you need to pass is the median income test. The median income test – and its companion, the means test – is a formula that is used to determine whether or not the person seeking to file has enough money to make payments to creditors.

If so, they must file for Chapter 13 bankruptcy instead of Chapter 7. These tests were added in 2005 when the bankruptcy code was amended to stem the tide of Chapter 7 bankruptcies.

Testing Details

If you want to file for Chapter 7, or liquidation bankruptcy, it is necessary to measure your monthly income figure against the median income for your household size in your state. As long as your income is not greater than the median income, you typically are eligible for filing Chapter 7 bankruptcy.

In Florida, the current median income is (as of October 2010):

-$41,079 for a one-person household

-$52,073 for a two-person household

-$58,366 for a three-person household

-$68,763 for a four-person household

If your income is greater than the median income, you have to be able to pass the means test to continue with Chapter 7.

The means test looks at how much of your income is disposable. To determine this, required debt payments and certain expenses are subtracted to find out whether you would be able to complete a Chapter 13 bankruptcy, which is a restructuring of debt. If your disposable income each month falls below a certain threshold, you will be able to file for Chapter 7 even if your income is higher than the median income level for your state. If not, you will have to file for Chapter 13 bankruptcy.

The means test can be complex. There are many factors that can affect the outcome of a means test, such as family size and living expenses and write-offs such as charitable contributions and insurance policies.

For more information about the means test, and how it impacts your particular situation, contact an experienced bankruptcy attorney.

Shiobhan Olivero is the Owner and President of Olivero Law If you need a Brandon bankruptcy lawyer, Tampa bankruptcy lawyer, or Tampa bankruptcy attorney, call 813.654.5777 or visit Brandonlawoffice.com.

Posted on Tuesday, November 30th, 2010 at 7:55 pm under News and Press.
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Osenton Explains Bankruptcy Counseling Requirement

If an individual wishes to file for personal bankruptcy, it’s not just a matter of applying and going to court.

Under the U.S. Bankruptcy Code, debtors must attend credit counseling within 180 days before filing for bankruptcy and, subsequently, debtor education. The counseling must be provided by an agency approved by the bankruptcy court.

“When debtor’s file for bankruptcy, you must provide a certificate proving you went through your credit counseling,” said Reginald Osenton of Olivero Laws in Brandon, Florida. “After you file your application but before your debt is discharged, you then must take a debtor education course and provide evidence of its completion, as well.”

Pre-Bankruptcy Credit Counseling

This counseling session usually lasts about an hour and includes a discussion of the individual’s personal finances, alternatives to bankruptcy and the putting together of a finance management plan. The session can be done either over the phone, in person or even online.

Costs for the program usually run about $25, though the fee can be waived if the person is unable to pay. Be sure to obtain a certificate of completion.

Debtor Education

This part of the process is done after the individual files for bankruptcy yet before his or her debts are discharged. During the debtor education class, which can last up to two hours, the attendee will learn about the proper techniques for managing his or her personal finances, about good credit versus bad credit, and receive tips on how to budget wisely.

“Same as with the pre-bankruptcy credit counseling session, a debtor education course can be done in person, online or over the phone,” Osenton said. “You must also obtain a certificate. If you cannot pay the fee, which also may run around $25, it too can be waived.”

The pre-bankruptcy counseling and debtor education course requirements were put into effect during the 2005 amendments to the U.S. Bankruptcy Code.

If someone is thinking of filing for bankruptcy and has questions about the process, including the counseling and educational components, it is best for them to talk with an experienced attorney who can answer all of their questions.

To learn more visit, http://www.brandonlawoffice.com.

Posted on Monday, November 15th, 2010 at 8:01 pm under News and Press.
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Understanding Chapter 20 Bankruptcy

There are a host of bankruptcy codes out there, and some people have heard the term “Chapter 20” bankruptcy.

What is it?

Well, there is no such thing as Chapter 20 in the official bankruptcy code. What “Chapter 20” refers to is the combination of filing for Chapter 7 and receiving a discharge, then later filing for a Chapter 13 to take advantage of the benefits of both types.

Chapter 20 filings were recently limited during the Bankruptcy Reform Act of 2005, which made it less easy to file for successive bankruptcies. The amendments limited the public to filing for Chapter 13 every two years. Also, you cannot file for Chapter 13 unless four years have passed since filing for Chapter 7.

To better understand Chapter 20 filings, it is first important to understand what chapters 7 and 13 are all about.

Chapter 7 seeks to relieve someone from a debilitating amount of debt while liquidating as few of their possessions as possible. This is also called straight bankruptcy. Unsecured debts such as medical expenses and credit cards typically do not have to be paid back.

Chapter 13 is essentially a restructuring of your debt. The consumer works with the bankruptcy trustee on a payment plan, which usually takes place over a 3- to 5-year period. The disadvantage is that you are not immediately relieved of massive debt, but it offers greater protection of your assets.

During a Chapter 20 filing, people file for Chapter 7 to dump their unsecured debt and then file for Chapter 13 to pay off their remaining debt.

Although there are limitations on Chapter 20 filings since the 2005 amendments, securing a 3- to 5-year repayment plan of debts not discharged in the Chapter 7 filing can give a debtor more time to pay off dischargeable debts and avoid collection actions.

If you have bankruptcy questions, it is important to speak with an experienced bankruptcy attorney who can figure out how to best take advantage of bankruptcy laws for you.

Shiobhan Olivero is the Owner and President of Olivero Law If you need a Brandon bankruptcy lawyer, Tampa bankruptcy lawyer, or Tampa bankruptcy attorney, call 813.654.5777 or visit Brandonlawoffice.com.

Posted on Monday, November 1st, 2010 at 7:53 pm under News and Press.
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