Now that State and Federal Governments are seeking to re-open our economy in a phased approach, there are some 30 million Americans who have had to seek unemployment protection. With varying degrees of success, a large portion of them will be required to return to work. Voluntarily remaining home will likely disqualify you from continued unemployment insurance protection. For thousands of small businesses and millions of their furloughed workers, two months of revenue loss will mean they will remain shuttered permanently and those employees will be without jobs. Mortgage, rent and credit card programs, meant to assist during stay-at-home orders, will begin to expire and many will be left to fend for themselves. What can you do? While it should never be a first option, speaking to an experienced Bankruptcy attorney about the process and whether filing for Bankruptcy protection is right for you should be done sooner than later.
In 2005, Congress passed legislation making it harder for many to file a Chapter 7 case by creating what has become known as the “means test.” This test will force consumer bankruptcy filers whose annual salary is above the state median for their household size to file a Chapter 13 case. Chapter 13 cases are longer, more costly and require a portion of unsecured debt to be paid through a plan of reorganization. Conversely, for many Chapter 7 filers, their case ends in approximately 3 months and all unsecured debt can be discharged. The calculation of annual salary is the average pre-tax income of the debtor for the 6 months immediately prior to their filing date multiplied times 12. Having been unemployed for two or three months during this 6 month period will drastically reduce the means test income allowing for many to file a Chapter 7, who would not have been otherwise able to do so.
The means test income calculation is by no means the only consideration in determining if you should file a case or which chapter to choose, it does open up an additional option that many would have been denied in the recent past. Bankruptcy is a complex area of the law and it can offer significant relief in times of financial difficulty. However, it can be risky and costly for individuals who attempt to file without an attorney or choose one who is not fully versed in the nuance of the US Bankruptcy Code, Rules of Procedure and local rules. For these reasons, LoBue Law offers free, no-obligation consultations so you can make the right decision for your specific situation. Contact us today for an appointment.