Bankruptcy Dismissal for Abuse

Austin, Texas, Board Certified Bankruptcy Lawyer

The court may dismiss a bankruptcy case if it finds that a person is guilty of abusing the bankruptcy process. The main the factor in determining whether a person is abusing the system is whether he can afford to repay at least some of the debt that he seeks to discharge in bankruptcy. The bankruptcy court will look at your budget to determine whether you can afford to repay some of the debt. The court will review whether your income was calculated accurately, and whether your expenses are reasonable and necessary. The court has a large amount of discretion in determining what constitutes reasonable or necessary expenses, and how much can be spent on any particular budget category; although the judge will follow IRS collection guidelines absent a showing of special circumstances. If the court determines that you can afford to repay a significant portion of your debt, the case will be deemed abusive. The court would then normally give you an opportunity to convert the case to Chapter 13 and propose a repayment plan, or dismiss the case if you did not want to convert.

There is a lot of misinformation contained on the Internet concerning the means test in places you would not expect to find it. For example, on November 25, 2006 Martindale Hubbell’s lawyers.com website stated, “The "means test" is how the Internal Revenue Service will determine who can or cannot file for Chapter 7. Your income and expenses are examined in detail to see how they compare to the standard for your area as set by the IRS. If you earn less than the median income for a family of your size in your state, you can automatically file for Chapter 7 bankruptcy. But if your income from the last six months is greater than the median income and you can pay at least $6,000 over five years or $100 a month toward your debt, you are not allowed to file for Chapter 7 but must file for Chapter 13 instead. Chapter 13 will require you to repay a portion of your debts over three to five years.”

This information is simply incorrect. First, the Internal Revenue Service does not determine who can or cannot file for Chapter 7. Second, you do not automatically qualify for Chapter 7 bankruptcy if you earn less than the median income for a family of your size in your state. Third, above median income debtors are not automatically disqualified from filing Chapter 7 bankruptcy, as is suggested above. Do not believe everything you read. Consult with a board certified bankruptcy specialist to discuss your particular situation.

Free Consultation: Contact Board Certified bankruptcy attorney Fred E. Walker in Austin, Texas, for a debt relief consultation. There is no cost or obligation.