Soon
the holiday season will be upon us. To some, this time of year signals warmth,
family, and good cheer. To others, the holidays are simply another source of
stress. There are many pressures in this modern age that pull our focus in
several directions. Family finances are often something that get pushed to the
back of our minds, leaving many living beyond their means. As such, financial
debt is a keystone burden that many New Hampshire families face. After years of
neglect, mismanagement, pride, or the unexpected, families often consider the
possibility of filing for bankruptcy. Filing for bankruptcy need not be a daunting or
embarrassing process. Rather, many are so thankful for the relief a bankruptcy filing
can provide after months of phone calls and dealing with creditors.
There
are several different kinds of bankruptcy filings to help those in distress.
The different kinds of filings are divided into the frequently-noted “Chapters”.
For an individual natural person(s), Chapters 7 and 13 are of significance. Today’s
blog post considers a slight, but significant change in the process of filing
for one chapter or the other. For the Chapter a debtor chooses is not as simple
as picking one form or another. In fact, there are many questions and considerations
that a debtor ought to consider with an attorney before filing. The attorneys
at Parnell, Michels & McKay are equipped with the prerequisite knowledge and
years of experience needed to address an individual’s particular financial
situation. This blog post is intended to note a small, but important alteration
in the Bankruptcy Rules, not provide legal advice.
In general, a Chapter 7 is a pure liquidation
bankruptcy of dischargeable debt, and a Chapter 13 is a reorganization
bankruptcy design to repay some of the debtor’s debt. In 2005, the United
States Congress substantially changed its bankruptcy laws to add what is now
called the “Means Test”. The Means Test was implemented to prevent Chapter 7
filing abuse by debtors that possessed the ability to repay at least some of
their debts. In the most short and simplistic terms, the difference between a
Chapter 7 and Chapter 13 is dependent on the debtor’s income. If a petitioner
makes too much money, they may be prohibited from filing a Chapter 7 for
failing the Means Test.
The
Means Test is applied when a debtor possess a gross income that is higher than
the median state income as determined by the federal government. Still, an
application of the Means Test does not automatically induce a Chapter 13 bankruptcy.
Rather, the Means Test considers a certain amount of national allowances (for
items like food, clothing, etc.), taxes, the different kinds of debt a debtor
possesses, and certain other exceptions, across the six (6) month period prior
to filing. To be clear, this a vast over-simplification of how particular (and critical)
the Means Test can be for certain debtors. However, the area of concern for
this blog post is the recent changes in New Hampshire’s median state income.
As
of November 1, 2016, the median income for the state of New Hampshire is $61,580.
On October 31, 2016, the median income for New Hampshire was $56,289. This jump
in income is unprecedented. As on January 1, 2008, the median income in New
Hampshire was $50,086 and when the Means Test was implemented in 2005 the
median income in New Hampshire was $50,411. As one can see, the median income is
not guaranteed to improve by great leaps and bounds every year. While, the most
recent jump in median income may signal more prosperous times for the Granite
State, the change in median income also presents the possible opportunity for
more debtors to apply for a Chapter 7 bankruptcy. Such a significant jump could
prove crucial to those that fell just above the line after completing the Means
Test, but would have likely struggled under a Chapter 13 reorganization
repayment plan.
If
you have considered filing for bankruptcy, but have been concerned with the
prospect of doing so, now is the time to speak with the attorneys at Parnell, Michels & McKay. Our attorneys
will take guide you through a process that can be as technically complicated as
it is emotional. Please contact our office to
learn more. Let us help you move toward some financial stability.
