CBS Consumer Bankruptcy & Debtor Education Flashcards

What is the 'means test' introduced by BAPCPA for consumer Chapter 7 cases?

Answer: A statutory calculation using income and allowed-expense data to determine whether a debtor qualifies for Chapter 7 relief

The means test under 11 U.S.C. § 707(b)(2) compares the debtor's current monthly income to the state median and, if above it, applies IRS-standard expense deductions to determine disposable income available for creditor repayment.

If a consumer debtor's current monthly income exceeds the applicable state median income, what is the next step in the means test?

Answer: The debtor must complete the full means test calculation using allowed expense deductions to determine monthly disposable income

Exceeding the median income triggers Part 2 of the means test, where the debtor subtracts IRS-standard and actual allowed expenses; only if disposable income still exceeds thresholds does a presumption of abuse arise.

How is 'current monthly income' (CMI) defined for purposes of the Chapter 7 means test?

Answer: The average monthly income from all sources received during the 6-month period ending on the last day of the calendar month before filing

Under 11 U.S.C. § 101(10A), CMI is the average monthly income received from all sources during the 6-calendar-month lookback period immediately preceding the filing, with certain exceptions.

Which of the following income sources is EXCLUDED from 'current monthly income' in the bankruptcy means test?

Answer: Social Security Act benefit payments

Social Security Act payments are specifically excluded from the CMI definition under 11 U.S.C. § 101(10A)(B), ensuring Social Security income does not affect Chapter 7 eligibility.

What is a 'presumption of abuse' in a consumer Chapter 7 case and what does it trigger?

Answer: A statutory finding that arises when disposable income exceeds set thresholds, which may lead to dismissal or conversion to Chapter 13

Under 11 U.S.C. § 707(b)(2), a presumption of abuse arises when monthly disposable income multiplied by 60 months exceeds certain statutory thresholds, shifting the burden to the debtor to rebut or face dismissal/conversion.

How can a consumer debtor rebut a presumption of abuse in a Chapter 7 case?

Answer: By demonstrating special circumstances, such as serious illness or military activation, that justify additional expenses or reduced income not captured by standard deductions

Under 11 U.S.C. § 707(b)(2)(B), a debtor may rebut the presumption of abuse by providing documentation of special circumstances such as significant medical expenses or income reduction due to military service.