A couple of weeks ago, I wrote about the means test in a Chapter 7 bankruptcy case. I pointed out that it helps determine if the Chapter 7 filing is presumed to be abusive and that the means test serves a different purpose in a Chapter 13 case.
The means test may affect your case differently depending on where your case was filed. This post will only explain the Chapter 13 means test in the Western District of Wisconsin, where I practice.
In a Chapter 13 case, the means test helps determine the length of your plan and the amount your plan must devote to general unsecured creditors. As in the Chapter 7, we first compare your income to the median income for a similarly-sized household. If your income is above the median, you will likely be required to propose a 60-month plan. If below median, you will be able to propose a 36-60 month plan.
The next step is to determine how much your plan must provide to general unsecured creditors. After determining your actual monthly income (averaged over the last six months), we apply the allowable means test deductions. The resulting “disposable income” is the amount that must be devoted to your general unsecured creditors each month. Your total plan payments will also include amounts necessary to pay secured creditors, priority creditors, and the trustee’s commission.
Your bankruptcy attorney can tell you how the means test may affect your individual Chapter 7 or Chapter 13 case.