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Bankruptcy Basics: Means Test - "Under-Median" Debtors

If you have not done so already, please go back and read my June 6, 2012 blog entry entitled "Bankruptcy Basics: Means Test - A Basic Understanding".  That entry, as the title implies, gives you a basic overview of what the means test is and how it is calculated. In this entry, I am going to go through what it means to be an "under-median" debtor when you seek bankruptcy protection in the Chicago area. 

If you are looking to file for Chapter 7 bankruptcy protection, then being an "under-median" debtor just about ends the conversation, as it means that you are considered automatically qualified to file for Chapter 7.  This does not, however, mean that Chapter 7 is automatically the right option for you.  There are several other factors that go into that analysis, for which you need the advice of an experienced Chicago bankruptcy attorney.

If you are seeking to file for Chapter 13 bankruptcy protection, then being an "under-median" debtor gives you two major advantages.  First, it means that your "applicable commitment period (the minimum amount of time that your Chapter 13 plan can last without paying your debts in full) is three years, whereas if you were an "over-median" debtor the "applicable commitment period would be five years.  Second, it means that there is no minimum amount that is required to be paid to your general unsecured creditors based on your income.  In plain english, this means that you can have a three year Chapter 13 repayment plan confirmed (approved) wherein you only pay off your secured and priority debts, paying nothing to your unsecured debts, and receive a discharge at the end of the case.

Please do not construe this to be a final analysis of your case.  The means test is only one of many factors that must be considered and may have a significant impact on your ability to file your bankruptcy case and protect your assets.  Filing for bankruptcy protection got much more complex in 2005 and to ensure that you are protected, you need the advice and representation of an experienced Chicago area bankruptcy attorney.  If you are considering filing for either Chapter 7 or Chapter 13 bankruptcy protection, call the experienced bankruptcy lawyers at Ledford & Wu and schedule a free consultation.  Our attorneys will review all of the factors in your case, including the means test, to help you determine the proper course of action for your case.

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