bankruptcy means test limits

DOJ to Keep Bankruptcy Means Tests Limits Same into 2022

The DOJ Means Test Statement

The Department of Justice has decided to keep the bankruptcy means test limits the same through at least Spring, 2022, according to a post on its website yesterday.  The statement read, “The Census Bureau will not release updated median income totals by state and family size in 2021 due to data quality issues associated with the COVID-19 pandemic. As a result, the U.S. Trustee Program will not post updated median income totals until a Consumer Price Index adjustment in spring 2022.”

Why It’s a Departure

The move represents a departure for the agency. The bankruptcy means tests figures are typically adjusted twice a year, typically once in November. This is intended to represent updates to household size and income data for the states.  The information is obtained from the U.S. Census Bureau. It produces the California median income, which is then entered into the bankruptcy means test limits. Because the figures are not updated in the middle of a once-in-a-century pandemic, there is not an accurate standard for those seeking debt relief.

What the Bankruptcy Means Test Limits Represent

With these updated figures, debtors who file Chapter 7 bankruptcy must demonstrate if they are above or below their state’s median income limits. If below, there is a presumption of no abuse. If above, there is a longer form that must be completed, after which a presumption of abuse is determined.  So, it’s obviously beneficial for debtors to be “under the limit” to qualify for a Chapter 7 bankruptcy.

Context and Background of the Current State of the Means Test

In California, the means test limits based upon California median income are at or near record high levels. Despite the havoc which COVID-19 has wrecked on the economy, not only are home prices skyrocketing, but just as surprising, so are household income levels based on the most recent data available in May 2021.  A Chapter 7 debtor wants to be under that limit. Consequently, keeping it fixed for a few more months may be beneficial to those seeking debt relief.

CategoryBankruptcy

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