“Means Test” or “Just a Mean Test”: An Examination of the Requirement That Converted Chapter 7 Bankruptcy Debtors Comply With Amended Section 707(B)
Congress’s motivation behind the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (hereinafter “BAPCPA”) was that “‘[t]here is something inherently unfair about denying full restitution to creditors.”‘ [FN1] Essentially, Congress believed that many people who were filing chapter 7 bankruptcy were doing so in bad faith without first considering creditor repayment. Specifically, under BAPCPA, 11 U.S.C. section 707 of the Bankruptcy Code changed dramatically and memorialized an attempt to rectify this perceived inequity. [FN2] Section 707 did so by creating a new “means test” that debtors must complete at the time that they file a Bankruptcy case. [FN3] The purpose of the means test is “to measure the ability of *414 Chapter 7 debtors to repay debt and then, if they have sufficient debt-paying ability, to make them repay at least some of their debt–likely through Chapter 13–in order to receive a bankruptcy discharge.” [FN4] The new means test is designed to replace the subjective standard of good faith by utilizing a complex mathematical formula that produces a straightforward presumption or nonpresumption of abuse of the bankruptcy process. [FN5]
Most debtors filing bankruptcy with consumer debts must choose between filing a chapter 7 or a chapter 13 case. [FN6] Simply put, in a chapter 13 bankruptcy the debtor proposes a plan in which they offer to pay some of their debts from post-petition income, [FN7] along with a commission to the chapter 13 trustee. [FN8] In contrast, in *415 a chapter 7 case the individual debtor is not expected to pay any monies from post-petition income. The debts, …
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by: Justin H. Dion, Esq.
American Bankruptcy Institute