The Trouble With The Bankruptcy Means Test

October 26th, 2009 by Reed Allmand

For debtors seeking bankruptcy protection taking the bankruptcy “means test” can be a hassle that doesn’t always leave the debtor with a fair shake.

For debtors seeking bankruptcy protection taking the bankruptcy “means test” can be a hassle that doesn’t always leave the debtor with a fair shake.  When the Bankruptcy Abuse Prevention And Consumer Protection Act (”BAPCPA”) was passed in 2005, it failed to truly do what it was designed to do, prevent bankruptcy abuse.  What’s really happened is that many debtors are forced to take a “means test” that fails to take into account their real circumstances when calculating their ability to repay debt.  Instead, the “means test” uses standardized deductions and expense allowances that may or may not reflect the reality of that debtor’s situation. For example, a debtor who takes the bankruptcy means test is given a standard allowance for “telecommunications expenses” which are necessary for the health and welfare of the debtor and his/her dependents.  However, there is no set definition of what a “telecommunications expense” can include, leaving it up to the judge’s discretion.  Also, some people may need more “telecommunications expenses” than others, such as a self-employed debtor. Bankruptcy debtors who exceed the allowance allotted to them could be facing an uphill battle in proving that it is necessary. In the end, taking the bankruptcy means test increases the amount of time, energy and paperwork needed by legitimate debtors who seeking immediate bankruptcy protection.  The bankruptcy means test needs to be done away with and we need to return to a more sensible way of gauging a debtor’s ability to repay their debts.