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Imminent “Gotcha” for Bankruptcy Filers

Posted on Feb 22, 2010

One of the requirements put into the bankruptcy code in 2005 was something called "means testing."  It was meant as a way to force upper income debtors into chapter 13 repayment plans.  In a nutshell, it involves taking your total gross income for the six months prior to your bankruptcy filing, doubling it, and then comparing that to the median annual income for your state for your family size.  If your income exceeds this threshold, then a further analysis is done to see whether you have sufficient money left over to pay to creditors over time, after deducting some standard and non-standard living expenses.  This median income is taken from census data, then adjusted annually for inflation.  Well, we are due for an adjustment this year as of March 15, 2010.

The problem is, for New Jersey, the amounts are going down from their current numbers and not up. This could result in a debtor being above the median on the 15th, and below the median on the 14th.  Just take a look at the changes:

  • Household of 1: $60,026 to $59,812
  • Household of 2: $72,000 to $71,744
  • Household of 3: $86,070 to $85,764
  • Household of 4: $103,261 to $102,894

To most people, this would be minor; but for some that are on the borderline, it can be the difference between a simple case and a more involved one.  Also, if you are over the median now and were thinking you could wait until the numbers adjust up, think again.  In any event, if you are preparing to file a bankruptcy in New Jersey, you should consult with my office on how these changes may affect your case.

Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.