Jacksonville Bankruptcy Lawyer Blog

Anyone who knows anything about bankruptcy knows that there were big changes to the bankruptcy code in 2005. Several things were changed by that amendment, but the one having the greatest effect was the creation of the dreaded, "Means Test".
The Means Test was so terrifying and misunderstood that people rushed to file bankruptcy before it's scheduled enactment. Some said it made filing Chapter 7 impossible.
Of course, as with all big changes in the news, not all rumors are completely accurate. What the Means Test does is look at the number of people in the debtor's household, compare that number to the annually published IRS standards and see if the debtor makes less money than the average American in the area. If the person makes less money than average, they can file a Chapter 7. If they make more than the average, they have to file another chapter and make payments to their creditors. This is because they have the Means to do so, i.e. the Means Test.
There are two big exceptions to having to take the Means Test. If the debtor is or was recently an active duty member of our military, they can bypass the means test or; if the debtor's debts are mostly business debts, they can bypass the means test. So, in theory, a person can make $200,000 a year and still file Chapter 7 as long as they qualify under one of these two exceptions.
Even if you don't believe you will pass the Means Test, you should probably have a lawyer calculate it anyway to be sure. There are some expenses which can be deducted from your income and there are some forms of income, such as social security, which don't count in the analysis.
If you have questions about bankruptcy contact a Mandarin Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

When in 2005 Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), a flurry of people ran to file their cases before the changes occurred. Everyone had heard that the new law would make it impossible to file for Chapter 7 and that everyone would now be required to file Chapter 13 cases, making payments for five years. Well, Chapter 7 bankruptcy is still alive and well and the big change that was put into place is called, "The Means Test". The Means Test requires the debtor to show that their income, based on their family size, is less than the average American in their area. It's that simple. The problem debtors are having is that they don't want to file Chapter 13 cases, where they have to pay a trustee their disposable income for five years, they want to file Chapter 7 cases where their case can be closed in five months with no payments made.
Congress thought that by forcing higher income debtors to file Chapter 13, creditors would get paid some of what they're owed and creditors deserve to get paid what the debtor is able to pay. Fortunately for the many residents of Jacksonville, Florida who have heavily invested in rental properties, Congress thought of them as well. When BAPCPA was drafted someone realized the chilling effect a means test would have on small businesses and other small investors. Since only Chapters 7 and 11 are available to corporations, most small businesses would have to be liquidated in Chapter 7 or would have to pay the enormous cost of filing a Chapter 11. Small investors would be forced to file Chapter 13, which would prevent them from doing business for the five year period it took to complete their payment plan. These are the reasons why Congress created an exception to the means test for those individuals whose consumer debts make up less than half of their debt, i.e. if more than half of your debts are business, you can file Chapter 7 without taking the means test at all.
During the housing boom many residents of Jacksonville purchased homes to rent in speculation that their value would keep increasing. Instead, the market tanked to the point where nearly half of all homes owe more money on their mortgages than the homes are worth. Many of these people have higher incomes than average and wouldn't be permitted to file under Chapter 7 due to the means test but because these properties were purchased as investments, they should all be able to bypass the means test and file Chapter 7 automatically.
If you've got investment properties whose debts exceed your consumer debts, contact a Orange Park Bankruptcy Attorney at (904) 685-1200 for a free consultation.

The effect a raise will have on your Jacksonville Bankruptcy depends on which Chapter you've filed and the amount of the raise. "Material" is a term often referred to in the legal world. Prior to law school, I would have thought this had to do with fabric, but no, "Material" in the legal sense means, "Significant". You may have heard the term, "Material Witness". The same term can be used to describe a raise. Is the raise a big enough raise to have a "material" effect on the debtor's income? If the answer is yes, then it may have an effect on your case.
With few exceptions qualifying for a Chapter 7 requires you to demonstrate that your income is less than the average American for your family size. This is called the, "Means Test". To calculate your income, the last six months of your income is added up and multiplied by two. This gives a quasi-accurate report of what your income will be going forward. If your raise occurs after you've filed your Chapter 7 and you qualified on the date of filing, you're case probably won't be effected by the raise. That being said, there is a forward looking aspect to the "Means Test" which requires you to declare any anticipated changes in your income. If you know the raise is coming, you need to report it.
In a Chapter 13 case a raise has a very different effect. A Chapter 13 is a reorganization of your debt. Generally, secured creditors get paid in full and unsecured creditors get paid what's left, your disposable income, if anything of your paycheck after paying living expenses and secured creditors. When you get a raise, the amount of money going to your unsecured creditors can increase because you have more disposable income. So, if you have unsecured creditors in a Chapter 13 who aren't getting paid in full, you won't see any money from your raise until your case is over because that increase in pay will go to the unsecured creditors. However, if your unsecured creditors are getting paid all of the money they're owed, then an increase in income means that you'll be able to pay everyone off sooner. Once everyone is paid in full, your case can be closed and you can get on with your life.
If you have questions about how a raise can effect your case or on which Chapter to file and when, contact a San Marco Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Jacksonville Bankruptcy Courts take into account who lives with you when you file bankruptcy and, depending on the chapter of bankruptcy you file, they may consider those people in different ways. I don't mean to imply that the character of the people you live with matters. It makes no difference if you're living with Tim Tebow or Timothy McVeigh. What matters is whether those living with you are dependent on you for most of their care and if they aren't, the court wants to know if they make regular contributions to the household.
A regular contribution to the household is any payment of money to or on behalf of the person filing bankruptcy. A good example of this is when someone's mother pays their phone bill every month. Their mother's intent is to help them out a bit and have them call more frequently. By paying for that utility, it frees up more money for the debtor and so that debtor has more money to pay bills. A regular contribution from anyone counts, but most contributions come from people who cohabitate, such as boyfriends, girlfriends and roommates.
When figuring out which chapter of bankruptcy best suits your situation (if any), your lawyer should take your basic income information and preform a cursory, "Means Test". The Means Test was created by the U.S. Legislature in 2005 and requires that anyone wishing to file a Chapter 7 bankruptcy show that their income is lower than average for their family size than the average American household of the same size in their area. There are exceptions to this test for active military and some business holders, but generally this income test is required.
The IRS publishes the average American household incomes by family size every year. This amount is referred to as the, "Median Income".
Your family size is made up of you and your dependents. Dependents often include your spouse and children but can also include elderly parents or other dependent relatives. You may notice that roommates and unmarried partners are not counted here. In addition to including the members of your household in the calculation of your family size, you must also include any income the members of your household makes.
So, if you make $30,000 and your spouse makes $30,000, your combined income for a family size of two is $60,000. The average income for a family size of two in Florida is $49,729 right now, so your income would be high to qualify for Chapter 7. However, if you had a roommate instead of a spouse and that roommate paid $500 per month in bills, your household income would be your $30,000, plus $6000 (12 months x $500). Since the average income for a family size of one in Florida is $40,766, you'd now qualify for a Chapter 7. These calculations can get complicated, especially since there are several deductions that can be taken from a debtor's income.
Your family size can have an enormous impact on your options in bankruptcy which can mean the difference between finishing your bankruptcy in five months or five years. Due to the complicated nature of bankruptcy means testing, it is difficult if not impossible for someone to do without professional help. If you would like more information on Means Testing or bankruptcy generally, contact a Jacksonville Beach Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

As is most legal processes, bankruptcy can be a difficult thing to maneuver. There is a lot of misinformation out there, you need to be careful to get your information from a trusted source. Here are some myths regarding bankruptcy:

Myth 1: If I file for bankruptcy, everyone will know.
Like most legal proceedings, most bankruptcy documents are public record. Since I work at a law firm in the bankruptcy department, I search these records all the time. I even have a special username and password that allows me access online. However, how many times do you think your friends, family, or co-workers search through federal court records? The truth is that while your bankruptcy documents will be public information, it is unlikely that those you know would search to find them.

Myth 2: If I file for bankruptcy, I have to give up all my house.
If you are filing a Chapter 7 or Chapter 13 bankruptcy, you are often able to keep your house. Obviously, you need to be sure that you can pay your mortgage, or it would be useless to try and keep the house. But if you can afford the payments, then you can reaffirm the debt and retain your house. In a Chapter 13, you can even catch up on mortgage arrearages through your Plan, which may be all the help you need to keep your home.

Myth 3: Chapter 13 Plans require you to pay all of your unsecured debts.
A "means test" is the tool used to figure out if you qualify for a Chapter 7 or Chapter 13 bankruptcy. If you must file a Chapter 13, then a similar test tells you what your disposable monthly income is. This amount must be paid to your unsecured creditors. So, depending upon your situation, you could pay all of your unsecured debt, very little of your unsecured debt, or none at all.

Myth 4: Married couples must file bankruptcy together.
This is not true. You can file a joint petition if you want to save on court costs, but you are not required to. A Jacksonville Bankruptcy Attorney can assess your particular situation and tell you whether it is beneficial for one of you or both of you to file, based on how much debt you have, what kind of debt it is, and in whose name the debt is in. Often times it is more beneficial for one spouse to file.

To discuss any questions you have regarding bankruptcy, creditor harassment or consumer law, contact a Jacksonville Bankruptcy Attorney today at 904-685-1200 for a free consultation.

Recently, the U.S. House of Representatives voted to pass the The National Guard and Reservist Debt Relief Act of 2011 (H.R.2192). This bill is an extension of a 2008 version of the bill with the same name. The currently existing law helps soldiers qualify for Chapter 7 bankruptcy by allowing those on active duty to bypass the means test.

Soldiers would more easily qualify for a Chapter 7, because they can now bypass the means test. The means test requires the court to look at the debtor's income and compare it to an average income for the same family size. If the debtor's income is above average, then the filing a Chapter 7 is presumed a fraudulent abuse of the system as the debtor makes too much money to not pay any debts back. The debtor presumed fraudulent can then either file a Chapter 13 bankruptcy or pursue a non-bankruptcy option. The National Guard and Reservist Debt Relief Act of 2008 dictates that those in active duty for at least 90 days do not have to overcome any fraud analysis. They automatically qualify for a Chapter 7 regardless of how high their income is.

The justification behind the bill is that oftentimes these soldiers are called upon on short notice, requiring them to leave higher paying jobs to travel to remote locales to defend America. This may lead to soldiers having to maintain more than one household. Again, to qualify under this bill, reserve members must have been on active duty for 90 days or more since September 11, 2011. You can also qualify during the 540 days following activation.

If you are a military service member and would like to find out more about filing for bankruptcy, contact a Jacksonville Bankruptcy Attorney today for a free consultation.

Filing for bankruptcy can be very confusing for those trying to go it alone. As an in-depth legal process, it is greatly beneficial to have a Jacksonville Bankruptcy Attorney to help you navigate your way through a successful bankruptcy. Here are some reasons why:

1. There are many calculations that must be done correctly. To file for bankruptcy, you must first know which Chapter you qualify for, a Chapter 7, 13, 11 or 12. One step to figuring it out is by completing a Means Test. This is complex thing to do. You must know things which deductions you can use for food, clothing, personal care, health care, housing, and many more. You'll need to how the allowances for vehicles work and what involuntary deductions you can take. You must know how to list future debt payments correctly. And the list goes on and on. Without the proper knowledge and skill, this can be very difficult to do right the first time. If you do not do this correctly, the court could dismiss your case without a discharge, penalize you with fines or in rare cases, even send you to jail. Hiring a Jacksonville Bankruptcy Attorney would be beneficial because someone with knowledge and experience would be handling these issues, taking the stress off of you.

2. Another daunting task is drafting a Chapter 13 Plan. This Plan is very important, as it outlines your responsibilities over a three to five year period. You must know which creditors get paid, how much is required to go to unsecured creditors, and how to allocate the Trustee's portion. You want to make sure that you get all the benefits you can through your Plan. It is not the job of the Court or Trustee to watch out for your interest, it is there job to be sure that the code is being applied properly.

3. A Jacksonville Bankruptcy Attorney can negotiate with creditors for you, if need be. We can dispute claims on your behalf or negotiate lesser amounts owed. If you hire us, then you will not have to deal with creditors on your own. Once creditors know that you are represented with regard to their debt, then they cannot contact you anymore. This can be a relief, especially if the creditors are calling multiple times per day or you have multiple creditors calling.

4. Time can be saved by hiring counsel. While it may only take an attorney a short time to fill out a document correctly, it might take you hours. An attorney is trained to know how to fill out the paperwork quickly and efficiently. Since you do not do this everyday, it will likely take you much longer.

These are just a few reasons to hire a Jacksonville Bankruptcy Attorney to file your bankruptcy. There are many more. Contact us today at 904-685-1200 to set up a free consultation.

Though few Jacksonville bankruptcy filers make a million dollars a year, it is still possible for such a debtor to get a discharge in a Chapter 7 liquidation bankruptcy. In 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which instituted all sorts of hoops debtors now have to jump through to successfully file a Chapter 7 bankruptcy. The most common "hoop" is known as the "Means Test".

The Means Test requires under 11 U.S.C. § 707(b) that a debtor whose debts are primarily consumer show that their gross income is less than the average gross income for their family size in their geographic region. Let me say that again in English, "If your debts are mostly from non-business transactions you have to prove to the court that you, your spouse and one kid make less than the average married couple with one kid in Jacksonville." Most people skip over the first part of this paragraph and focus on the income and family size. However, if you can show that your debts are primarily non-consumer or "Business related" debts you can bypass the means test altogether. For example, if you make $1,000,000 a year and you are a family size of one, you far exceed the median income as stated by the IRS, but if you can show that your debts are more business than consumer, you can file Chapter 7 anyway.

This loophole was put into place by Congress to encourage businesses. We've all heard stories of a large percentage of small business failing within their first year. Apparently Congress heard this too and decided to allow business debtors to file Chapter 7 instead of forcing them into a long, costly Chapter 13 to encourage people to take risks and open businesses. Whether it is actually good for the economy is up for debate, but Congress thought so, so we now have the 11 U.S.C. § 707(b) exception to the means test.

If your debts are primarily business related and you have a substantial income, consider your options in Chapter 7 before jumping into a Chapter 13. Contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

The Jacksonville Bankruptcy court is part of the Middle District and a Middle District Court ruled on October 11, 2011 that Social Security benefits need not be included in either the Means Test or in the disposable monthly income (DMI) paid to unsecured creditors in a Chapter 13.

To quote the Honorable Judge Steele:
"Therefore, a Chapter 13 plan need not provide that social security benefits be included as projected disposable income which will be applied to payments for unsecured creditors." See Vandenbosch v. Waage

Now we know that Social Security funds will not be used in calculating Chapter 13 payments, but what about cases that have already been filed? Judge Steele stated in his opinion that these benefits, "need not... be included as projected disposable income". I would analyze this to say that they can be included if the debtor desires or needs to use the funds to show that they can fund a plan to overcome the "Good Faith" requirement of Chapter 13, but that the debtor cannot be required to use these funds if the debtor chooses not to.

What is yet to be seen is whether we can reduce payments on already confirmed plans that contemplated including the social security as income on Form B22C (Means Test). The court requires that a plan be modified if there is a, "change of circumstances" as to income. Historically, this meant an increase or decrease of income, not a reclassification of what income means. I take the position that this is a change of circumstances sufficient to justify a modification, though we will have to wait and see.

Continue reading "Social Security Benefits Exempt From Chapter 13 Payments" »

For those of you who don't know, a Chapter 13 requires you to make payments to your creditors, typically from 3 to 5 years. What most people don't know is that there are two different payoff schemes in a Chapter 13, the Disposable Monthly Income (DMI) plan and the 100% plan. Which plan you get depends on the facts of the situation but it basically works as follows:

In a DMI plan, your monthly payment to the trustee for unsecured creditors is calculated based on your monthly income minus the established by the IRS reasonable and necessary living expenses allocated to your family size. The idea is that you get to keep enough money to live, which is important, but that any money you earn in excess of living must be paid to your creditors. This is the more difficult plan to succeed in, as it requires you to go a number of years living off of the IRS standard, which requires a strict budget. This plan cannot get paid off early unless it's first transformed into a 100% plan, which would only happen if you had a significant increase in income.

In a 100% plan, your monthly payment to the trustee is calculated based on your total debt rather than your monthly income. We add all of your debts together, add 10% to pay the trustee (see how the trustee gets paid), and divide the total by the number of months you need to pay (typically 60 months/5 years). This payment is less than what your DMI payment would be. If the payment is higher, then you should be a DMI plan instead of a 100% plan. Since you're paying 100% of your debts in this plan, you can pay off your bankruptcy early.

When in a Chapter 13 bankruptcy you have an ongoing obligation to report any increase or decrease in your gross income. You also must annually provide a copy of your tax return to the trustee. Changes in your income will require recalculation of your plan, which can increase or decrease your plan payment. Changes in your income can also mean the difference between your being a DMI plan and a 100% plan.

Continue reading "Chapter 13: Paying off and getting out " »

A means test dictates what chapter of bankruptcy you qualify for. This is a very important part of your case, and a Jacksonville Bankruptcy Attorney will make sure that it is done correctly. The attorney will input your income for the prior six months and then take deductions for the things allowed by law. Knowing what deductions can be taken and how to accurately calculate them is extremely important, as this will lower your disposable monthly income amount.

Your disposable monthly income number is one of the most important things in your bankruptcy case. This number dictates whether you can file for a Chapter 7 bankruptcy or if you must file for a Chapter 13 bankruptcy. Also, if you file for Chapter 13 bankruptcy, your disposable monthly income number will dictate how much money you must pay to unsecured creditors in your Chapter 13 Plan.

The means test can be very tricky, you really need to know what you are doing to get an accurate test. If it is not done correctly, the trustee will file an objection in your case. We offer means testing here at Apple Law Firm. Contact a Jacksonville Bankruptcy Attorney today for your free consultation.

With few exceptions, qualifying for a Chapter 7 Bankruptcy requires a debtor to show that their household income is less than the median household income for the same family size in their region. These amounts are updated and changed each year by the IRS. In Florida the numbers currently are as follows:

Household Size	Median Income
1	$40,029
2	$50,130
3	$54,594
4	$65,135

*For each additional member beyond 4, add $7,500.

Marriage may be a blessed arrangement that brings us together, but with financial problems being one of the most common reasons for divorce, it makes sense to try and clear up any of those issues from earlier in your life before tying the knot.

When BAPCPA (the Bankruptcy abuse prevention and consumer protection act) passed in 2005, new requirements were imposed on debtors wanting to qualify for Chapter 7 bankruptcy. One of those requirements was 11 USC 707(b) or the "means test". 707(b) requires a debtor to show that their gross income for their family size is less than the median income for a family of the same size in their geographic region. These median income charts are made available through the IRS and are updated annually.

Generally, if a debtor's household income for their family size is higher than the median, that person is not eligible for a Chapter 7 (liquidation) bankruptcy and must instead file a Chapter 13 (reorganization) bankruptcy. Defining income is usually not difficult, the IRS defines gross income under 26 USC 61, and most everyone has had experience with it as we've almost all paid our taxes based on it.

What is more difficult for debtors is that the bankruptcy court doesn't just count the debtor's income, but also the income of all household members as well as any "regular contributions" to the household, perhaps from parents or friends who regularly pay a single bill. A marriage will always increase the household size (unless you were living together prior to the marriage), but won't always increase the gross income of the debtor's household. If the new spouse has a stellar income, this will disqualify the debtor from filing a Chapter 7, but will help them fund a Chapter 13. If the new spouse has no income, this will help a debtor who would otherwise have been over the income limits qualify for Chapter 7.

In reality, bankruptcy is a concept that comes from biblical times (see Deuteronomy 15:1-2). As a result, it has transformed through all the years and societies of the world and can be very complicated. If you're considering bankruptcy you should talk to a professional. If you would like to schedule a free consultation with our Jacksonville Bankruptcy Attorney, please call 904-685-1200.

When you file for Chapter 13 bankruptcy, you will pay off your debts through a Chapter 13 Plan that lasts anywhere from 3-5 years. A Chapter 13 Plan allows a debtor to catch up on most any debt, including mortgage arrearages, owed taxes, missed payments on vehicles, HOA dues, legal fees, fines owed to the city or state, and more.

Your unsecured creditors might also get some payments through the Chapter 13 Plan. If they will and how much will they receive is determined by your means test and the amount of unexempt property that you have. Any amount of unsecured debt that you have over this amount will be discharged at the successful conclusion of your Chapter 13 bankruptcy. For example, if you owe $20,000 in unsecured debt and your case only dictates that you must repay $5,000 to unsecured creditors, the $15,000 balance gets discharged or forgiven when you successfully complete your Chapter 13 Plan. If your case dictates that no money must be paid to unsecured creditors, then the entire balance of $20,000 would be forgiven.

To see how a Chapter 13 Plan would be structured for your specific situation, contact a Jacksonville Bankruptcy Attorney today for a free consultation.

Yes. You must disclose all sources of income on your bankruptcy schedules. You can, however, put on the schedules that this support is not likely to continue in the future, but you must disclose any monies received in the prior six months from any source. Some income, however, is exempt from counting towards your Current Monthly Income calculation as reported on the means test. Some social security income, unemployment income, pension income, etc. will not count towards your Current Monthly Income. Your Ponte Vedra Bankruptcy Attorney will know how to list your income so it will be most beneficial to you. Contact us today at 904-685-1200.