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Breaking down the bankruptcy means test, P.3

We’ve been looking in previous posts at the so-called means test, breaking it down into its various parts to get a better look at what the test actually is. We’ve already looked briefly at the first and second parts, which calculate the debtor’s adjusted gross income and deductions, as well as the third part, which is aimed at determining whether the filing is presumptively abusive.

The fourth part of the test is important in that it allows debtors whose filings are determined in part three of the means test to be presumptively abusive to identify special circumstances which justify additional allowable expenses or adjustments of his or her current monthly income. 

There are a variety of “special circumstances” that may justify an adjustment of a debtor’s current monthly income or additional expenses. Two examples listed under the federal Bankruptcy Code are a serious medical condition or a call to active duty in the military. Because the statute does not list any other examples, courts have had to grapple with what exactly constitutes “special circumstances” which justify the above mentioned adjustments.

Different courts handle the issue differently, with some requiring extraordinary circumstances and other taking a more moderate approach. For debtors seeking Chapter 7 protection, it is important to understand how the jurisdiction in which one is filing handles this issue. In jurisdictions where a strict interpretation is applied, it is more likely that debtors will have their Chapter 7 filing converted to a Chapter 13 case or dismissed altogether.

An experienced attorney can help ensure that a debtor puts together the most thorough and accurate application possible, and quickly addresses any issues which arise in the application process.

Sources:

Roma Perez, “Not "Special" Enough for Chapter 7: An Analysis of the Special Circumstances Provision of the Bankruptcy Code,” Cleveland State Law Review, 2013.

11 U.S. Code § 707

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