Many people and even many attorneys mistakenly think that if you are over the means test you are automatically a Chapter 13. This is a huge misperception. I have filed many Chapter 7s for clients who have exceeded the means test and there are a variety of ways with which to accomplish this. To understand this, you need to understand that the means test is a presumptive test not a definitive one. In other words, you can qualify for a Chapter 7 if you can demonstrate your legitimate expenses still result in disposable of $100 per month or less. This can take some real strategy…and many of the tactics I discuss to lower your payments apply to getting you into a Chapter 7 if you are the means test.
To understand this, recall the basics of a Chapter 13. A Chapter 13 determines your payments based on your disposable income after legitimate expenses as defined by the bankruptcy code and IRS standards. Many of these expenses have presumed acceptable levels but these presumptions can often be rebutted.
An easy example can illustrate the point. One of my clients was well over the means test based on their income. But, sadly, their two sons were autistic, requiring costly therapy and medical treatments that were perfectly legitimate. We simply documented these expenses and and suddenly we could demonstrate their disposable income was less than $100 per month and thus they were a Chapter 7. If you think about it, this result makes perfect sense. You just have to have an attorney who knows how to do this and, if need be, push a combination of expenses to get you there.
Another very common expense that can enable a household to qualify for a Chapter 7 despite being over the means test is child care. Again, this makes sense. Take a husband and wife, both of whom work, with two young children. Their income is $88,000 or over the means test by about $4,000. But for both to work, they must get child care which can be very costly…for two children, easily $500 per month. Compare that to a family who also has $88,000 in annual income but only one parent works and thus they have no child care expenses. Clearly, these are very different situations. By documenting child care expenses it is very likely the first couple will easily qualify for a Chapter 7.
For further discussion on how you can qualify for Chapter 7 even if you are the means test, see my article on lowering payments in a Chapter 13. The same logic applies. If by, applying the tactics discussed in that article we can get your disposable income to $100 or less, you can qualify for a Chapter 7.
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