Bankruptcy Massachusetts-Means Test Issues

February 4, 2010

by Bankruptcy Attorney Kara O’Donnell of Quincy, MA   

When a new client calls me or comes into my office for a consultation we go over a standard list of issues. However, no two cases are ever the same!   

A standard question is “What is your household size?” Seemingly easy to answer, what if you were living with your spouse and kids but in your parents’ house? What if you were living with a wealthy friend, someone who was just helping you out with a cheap/free place to live but who did not pay your bills or otherwise give you money?   

One, two, three, four . . .

 

The issues have become complicated considering that there are so many more living arrangements than the traditional family. Non-traditional living arrangements can include extended families, domestic partnerships, roommates, nannies, etc. When these situations arise, your bankruptcy attorney now must determine who to count.   

Some cases are more clear cut than others. Your family (you, your spouse & 2 kids) live with your parents in an in-law apartment in your parents’s house? The separate households seems just that, and you would easily be able to claim a household of FOUR on the Means Test. However, for more grey areas, such as two families sharing a house, there are no clear cut answers. The information you should be prepared to give your attorney should include: who pays the bills, is there a family relationship to the other parties, do any parties pay rent or utilities?   

Why do we bankruptcy attorneys care so much about your household size? Because it is a determining factor in the Means Test. The basic purpose of the Means Test is to determine whether a debtor is eligible to file a Chapter 7 petition based on a rather complicated calculation of the debtor’s income and expenses. If you don’t pass it, you may not be allowed to file Chapter 7 and must then consider filing for Chapter 13 (the repayment plan.) Thus, the lower the final figure on the means test, the better. Generally, the more individuals who live in the household, the easier it is for the debtor to qualify for Chapter 7. This is because the Household Size is compared to the State median income for a household of the same size.   

The Means Test is not only based on “household size” but also “household income.” Household income and the number of individuals in the household are central issues in the means test. But, interestingly, “household” is not a term defined in the Bankruptcy Code.   

Which leaves us . . . WHERE?
One bankruptcy attorney I know of uses a general rule of “whoever sleeps in the house more then 3 nights a week or is financially dependent on someone else in the house should be seriously considered as a member of the household for the means test as well as schedules of income and expense.” While this seems like it could provide answers to many, if not most clients, remember, every case is different from the last! You must provide your bankruptcy attorney with as much information as possible so that he/she can provide you with the best legal advice for your own situation.   

Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES                    (857)526-1355
Quincy, Massachusetts
http://www.QuincyLegal.com
Help@QuincyLegal.com   

   

Posted by Kara O’Donnell

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