All consumers filing a bankruptcy case must complete Form 22A-1 (Chapter 7 cases) or Form 22C-1 (Chapter 13 cases), more commonly known as the “means test,” and submit it with their bankruptcy petition. This “test” is actually a simplistic measure of a bankruptcy debtor’s capacity, i.e., the amount of money, he or she has available to repay creditors. Thus, the means test takes into account a prospective bankruptcy debtor’s income, typically in the form of wage earnings. How long is the lookback period for calculating income for the means test?
The applicable income review window for means test purposes is a blind look-back period of six (6) months. By the term “blind”, the review looks back six (6) months and includes any money earned during this period, unless it is social security income or falls within another exception.
As an example, consider a bankruptcy filing that occurs on August 21st, 2017. The six-month means test lookback period ends on the last day of the month prior to the month in which the bankruptcy case was filed. In this case, that would be June of 2017. Counting backward six months would determine that January of 2017 was the first month of the six-month lookback period.
Thus, a bankruptcy filed on August 21, 2017. will consider all income earned from January 1st, 2017 through June 30, 2017. Note that any income earned from August 1st to August 21, 2017, the day of the bankruptcy filing, will not be considered.
Thus, in terms of trying to establish a debtor’s typical average monthly income, the means test may be deficient since a prior six-month earnings period may not represent a debtor’s expected and normal future employment scenario.
The means test does little to set forth whether or not a debtor is still receiving a particular source of income, or will continue to receive this income. A one-time bonus or sales commission from four months prior to an expected bankruptcy filing will count towards a debtor’s income calculation, showing an inflated, irregular amount of income.
The means test is therefore prone to showing inaccurate results that falsely demonstrate a bankruptcy debtor’s propensity to repay creditors. Keep in mind, that an expected increase in income may necessitate filing bankruptcy as soon as possible.
Form 22A-1 and Form 22C-1 must include all income earned by the debtor for the six (6) months preceding the bankruptcy filing. Ensure that your means test calculation and all of the information on Form 22A-1 is accurate and complete. At Loan Lawyers, our South Florida consumer rights and debt defense attorneys help individuals with problems related to the payment of debts. Contact our office today by calling 954-523-HELP (4357) and see how we can help.