The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
Allen we are familiar with these changes and understand the advantages and
disadvantages of filing a bankruptcy petition (chapter 7, 11 or 13). Please
contact us today at (612) 656-9006 so we can talk to you about your specific
circumstances! Below you will find some basic information and useful links
relating to filing for chapter 7.
Am I eligible to file chapter 7?
If your annualized income is equal to or less than the state median income
(depending on the size of your household) you are eligible to file Chapter 7. In
such cases there is no need to consider the means test discussed below.
If your annualized income is greater than the state median things become
more complex. In such a case the debtor must pass the means test to be
eligible for Chapter 7.
The first step in applying the means test is deducting monthly expenses from
current monthly income. Rather than using the debtor’s actual monthly living
expenses, the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 includes a set of expenses established by the Internal Revenue Service. The
allowed monthly living expenses established by the IRS involve a complex
combination of national, local and regional expenses in three primary
• food, clothing and other items
• housing and utilities
In addition to the IRS monthly expenses, the law allows debtors to deduct
some additional expenses such as certain expenses relating to education
and children (who are dependants of the debtor).
1. If the debtor’s monthly income after deducting allowed expenses is less
than $100, the debtor passes the means test, and may file for Chapter 7.
2. If the debtor’s monthly income after deducting allowed expenses is
between $100 and $166.66, and the debtor can pay 25 percent of their
unsecured debts, such as credit cards and medical bills over a five year
period, the debtor fails the means test, and cannot file for Chapter 7.
3. If the debtor’s surplus monthly income after deducting allowed expenses
is more than $166.66, the debtor fails the means test and cannot file for
There is a presumption of abuse by the debtor when the means test is
failed. Such a presumption will allow the court to dismiss the Chapter 7 petition.
In the alternative, the debtor may voluntarily convert the case to Chapter 13
The new bankruptcy law contains a credit counseling requirement. Where
can I list a list of local providers?
A list of approved credit counseling and debtor education (also required)
providers can be found on the U.S. Trustee Program website here. You can
search for a list of approved credit counseling and debtor education providers in
your local area. All of these providers are approved pursuant to 11 U.S.C. § 111.
Be careful in making too many conclusions because there are certain
exceptions to the generalizations above. For example, the means test only
applies to a bankruptcy case where the debts are primarily consumer debts (not
business debts). Please call us at (612) 656-9006 so we can discuss your