If the debtor’s income is higher than the state median, the debtor must complete Form 22A-1 Chapter 7, 22A-2 Chapter 7 Means Test Calculation. Disposable Monthly Income (DMI) is then calculated and is based on allowances and actual expenses (see page 3) which are subtracted from a . Jan 11, · When you file bankruptcy, we run your income on a “current monthly income and means test” form called Form A (in the old days just “Form 22”). If you make too much money, you cannot file a simple chapter 7, and you are stuck in a chapter 13 on a repayment plan to your creditors. Aug 16, · A bankruptcy means test determines whether your income exceeds a certain amount. This test is required to show that you’re eligible for Chapter 7 bankruptcy based on your state’s income standards. The Chapter 7 bankruptcy means test may seem confusing at first, but it’s easier to understand if you break it down.
Related videosHOW YOU CAN BE DISQUALIFIED FROM CHAPTER 7 BANKRUPTCY EVEN IF YOU QUALIFY UNDER THE MEANS TEST
Telecommunication expenses could include the cable television service, internet service or a satellite service. Telecommunication expenses could include the costs of personal computers for use by debtors or their dependents to achieve education, work-related training, etc.
Home General Questions What is bankruptcy? What are my alternatives to bankruptcy? What is the difference between Chapter 7 and Chapter 13? Will I lose my stuff if I file for bankruptcy?
Will my neighbors and employer find out that I have filed Chapter 7 When does Chapter 7 make the most sense for me? Do I qualify for Chapter 7?
What could possibly go wrong? What documentation do I need to start Chapter 7 What happens if my income goes down or my expenses go up during my Chapter 7? Chapter 13 When does Chapter 13 make the most sense for me? Do I qualify for Chapter 13? What documentation do I need to start Chapter 13 Getting Started What info do I need to get started How current does my background info need to be?
Once the proposal is accepted by both the creditors and the Court, the debtor makes the payments to the Proposal Administrator each month or as otherwise stipulated in their proposal , and the general creditors are prevented from taking any further legal or collection action. If the proposal is rejected, the debtor is returned to his prior insolvent state and may have no alternative but to declare personal bankruptcy. An Administrator is required in the Consumer Proposal, and a Trustee in the Division I Proposal these are virtually the same although the terms are not interchangeable.
A Proposal Administrator is almost always a licensed trustee in bankruptcy, although the Superintendent of Bankruptcy may appoint other people to serve as administrators. In , there were 98, personal insolvency filings in Canada: 79, bankruptcies and 19, consumer proposals. In Canada, bankruptcy always means liquidation. There is no way for a company to emerge from bankruptcy after restructuring, as is the case in the United States with a Chapter 11 bankruptcy filing.
Canada does, however, have laws that allow for businesses to restructure and emerge later with a smaller debtload and a more positive financial future. The People's Republic of China legalized bankruptcy in , and a revised law that was more expansive and complete was enacted in Bankruptcy in Ireland applies only to natural persons. Other insolvency processes including liquidation and examinership are used to deal with corporate insolvency.
Irish bankruptcy law has been the subject of significant comment, from both government sources and the media, as being in need of reform. Part 7 of the Civil Law Miscellaneous Provisions Act  has started this process and the government has committed to further reform. Earlier a clear law on corporate bankruptcy did not exist, even though individual bankruptcy laws have been in existence since The earlier law in force was enacted in called the Provincial Insolvency Act.
The legal definitions of the terms bankruptcy, insolvency, liquidation and dissolution are contested in the Indian legal system. There is no regulation or statute legislated upon bankruptcy which denotes a condition of inability to meet a demand of a creditor as is common in many other jurisdictions.
Winding up of companies was in the jurisdiction of the courts which can take a decade even after the company has actually been declared insolvent. On the other hand, supervisory restructuring at the behest of the Board of Industrial and Financial Reconstruction is generally undertaken using receivership by a public entity. Dutch bankruptcy law is governed by the Dutch Bankruptcy Code Faillissementswet.
The code covers three separate legal proceedings. Federal Law No. Russian insolvency law is intended for a wide range of borrowers: individuals and companies of all sizes, with the exception of state-owned enterprises, government agencies, political parties and religious organizations.
There are also special rules for insurance companies, professional participants of the securities market, agricultural organizations and other special laws for financial institutions and companies in the natural monopolies in the energy industry. Insolvency Provisions Act, credit organizations used in conjunction with the provisions of the Bankruptcy Act. The main face of the bankruptcy process is the insolvency officer trustee in bankruptcy, bankruptcy manager. At various stages of bankruptcy, he must be determined: the temporary officer in Monitoring procedure, external manager in External control, the receiver or administrative officer in The economic recovery, the liquidator.
During the bankruptcy trustee in bankruptcy insolvency officer has a decisive influence on the movement of assets property of the debtor - the debtor and has a key influence on the economic and legal aspects of its operations.
Under Swiss law, bankruptcy can be a consequence of insolvency. It is a court-ordered form of debt enforcement proceedings that applies, in general, to registered commercial entities only. In a bankruptcy, all assets of the debtor are liquidated under the administration of the creditors, although the law provides for debt restructuring options similar to those under Chapter 11 of the U.
Bankruptcy code. In Sweden, bankruptcy Swedish: konkurs is a formal process that may involve a company or individual. It is not the same as insolvency , which is inability to pay debts that should have been paid. A creditor or the company itself can apply for bankruptcy. An external bankruptcy manager takes over the company or the assets of the person, and tries to sell as much as possible. A person or a company in bankruptcy can not access its assets with some exceptions.
The formal bankruptcy process is rarely carried out for individuals. Unpaid debts remain after bankruptcy for individuals. People who are deeply in debt can obtain a debt arrangement procedure Swedish: skuldsanering. On application, they obtain a payment plan under which they pay as much as they can for five years, and then all remaining debts are cancelled. Debts that derive from a ban on business operations issued by court, commonly for tax fraud or fraudulent business practices or owed to a crime victim as compensation for damages, are exempted from this—and, as before this process was introduced in , remain lifelong.
Often crime victims stop their claims after a few years since criminals often do not have job incomes and might be hard to locate, while banks make sure their claims are not cancelled. The most common reasons for personal insolvency in Sweden are illness, unemployment, divorce or company bankruptcy. For companies, formal bankruptcy is a normal effect of insolvency, even if there is a reconstruction mechanism where the company can be given time to solve its situation, e. The formal bankruptcy involves contracting a bankruptcy manager, who makes certain that assets are sold and money divided by the priority the law claims, and no other way.
Banks have such a priority. After a finished bankruptcy for a company, it is terminated. The activities might continue in a new company which has bought important assets from the bankrupted company.
Bankruptcy in the United Kingdom in a strict legal sense relates only to individuals including sole proprietors and partnerships. Companies and other corporations enter into differently named legal insolvency procedures: liquidation and administration administration order and administrative receivership. However, the term 'bankruptcy' is often used when referring to companies in the media and in general conversation. Bankruptcy in Scotland is referred to as sequestration. A trustee in bankruptcy must be either an Official Receiver a civil servant or a licensed insolvency practitioner.
Current law in England and Wales derives in large part from the Insolvency Act Following the introduction of the Enterprise Act , a UK bankruptcy now normally last no longer than 12 months, and may be less if the Official Receiver files in court a certificate that investigations are complete. It was expected that the UK Government's liberalization of the UK bankruptcy regime would increase the number of bankruptcy cases; initially, cases increased, as the Insolvency Service statistics appear to bear out.
The UK bankruptcy law was changed in May , effective May 29, The Government have updated legislation to streamline the application process for UK bankruptcy. The process for residents of Northern Ireland differs - applicants must follow the older process of applying through the courts. Bankruptcy in the United States is a matter placed under federal jurisdiction by the United States Constitution in Article 1, Section 8, Clause 4 , which empowers Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States".
Congress has enacted statutes governing bankruptcy, primarily in the form of the Bankruptcy Code, located at Title 11 of the United States Code. A debtor declares bankruptcy to obtain relief from debt, and this is normally accomplished either through a discharge of the debt or through a restructuring of the debt. When a debtor files a voluntary petition, their bankruptcy case commences.
District Courts , bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often dependent upon State law.
Certain real and personal property can be exempted on "Schedule C"  of a debtor's bankruptcy forms, and effectively be taken outside the debtor's bankruptcy estate. Bankruptcy exemptions are available only to individuals filing bankruptcy. There are two alternative systems that can be used to "exempt" property from a bankruptcy estate, federal exemptions  available in some states but not all , and state exemptions which vary widely between states.
For example, Maryland and Virginia, which are adjoining states, have different personal exemption amounts that cannot be seized for payment of debts. After a bankruptcy petition is filed, the court schedules a hearing called a meeting or meeting of creditors , at which the bankruptcy trustee and creditors review the petitioner's petition and supporting schedules, question the petitioner, and can challenge exemptions they believe are improper.
An important feature applicable to all types of bankruptcy filings is the automatic stay. The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter Chapter 7, known as a "straight bankruptcy", involves the discharge of certain debts without repayment. Chapter 13 involves a plan of repayment of debts over a period of years. Whether a person qualifies for Chapter 7 or Chapter 13 is in part determined by income.
Before a consumer may obtain bankruptcy relief under either Chapter 7 or Chapter 13, the debtor is to undertake credit counseling with approved counseling agencies prior to filing a bankruptcy petition and to undertake education in personal financial management from approved agencies prior to being granted a discharge of debts under either Chapter 7 or Chapter Some studies of the operation of the credit counseling requirement suggest that it provides little benefit to debtors who receive the counseling because the only realistic option for many is to seek relief under the Bankruptcy Code.
Often called "straight bankruptcy" or "simple bankruptcy", a Chapter 7 bankruptcy potentially allows debtors to eliminate most or all of their debts over a period of as little as three or four months. In a typical consumer bankruptcy, the only debts that survive a Chapter 7 are student loans , child support obligations, some tax bills, and criminal fines.
Credit cards, pay day loans, personal loans, medical bills, and just about all other bills are discharged. In Chapter 7, a debtor surrenders non-exempt property to a bankruptcy trustee, who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors.
In exchange, the debtor is entitled to a discharge of some debt. However, the debtor is not granted a discharge if guilty of certain types of inappropriate behavior e. Some taxes are not discharged even though the debtor is generally discharged from debt. Many individuals in financial distress own only exempt property e. Chapter 7 relief is available only once in any eight-year period. Generally, the rights of secured creditors to their collateral continues, even though their debt is discharged.
For example, absent some arrangement by a debtor to surrender a car or "reaffirm" a debt, the creditor with a security interest in the debtor's car may repossess the car even if the debt to the creditor is discharged.
Ninety-one percent of US individuals who petition for relief under Chapter 7 hire an attorney to file their petitions. To be eligible to file a consumer bankruptcy under Chapter 7, a debtor must qualify under a statutory "means test". The "means test" is employed in cases where an individual with primarily consumer debts has more than the average annual income for a household of equivalent size, computed over a day period prior to filing.
If the individual must "take" the "means test", their average monthly income over this day period is reduced by a series of allowances for living expenses and secured debt payments in a very complex calculation that may or may not accurately reflect that individual's actual monthly budget.
If the results of the means test show no disposable income or in some cases a very small amount then the individual qualifies for Chapter 7 relief. An individual who fails the means test will have their Chapter 7 case dismissed, or may have to convert the case to a Chapter 13 bankruptcy. If a debtor does not qualify for relief under Chapter 7 of the Bankruptcy Code, either because of the Means Test or because Chapter 7 does not provide a permanent solution to delinquent payments for secured debts, such as mortgages or vehicle loans, the debtor may still seek relief under Chapter 13 of the Code.
Generally, a trustee sells most of the debtor's assets to pay off creditors. However, certain debtor assets will be protected to some extent by bankruptcy exemptions.
These include Social Security payments, unemployment compensation, limited equity in a home, car, or truck, household goods and appliances, trade tools, and books. However, these exemptions vary from state to state. In Chapter 11 bankruptcy, the debtor retains ownership and control of assets and is re-termed a debtor in possession DIP. Upon meeting certain requirements e. If a specified majority of creditors do not vote to confirm a plan, additional requirements may be imposed by the court in order to confirm the plan.
Debtors filing for Chapter 11 protection a second time are known informally as "Chapter 22" filers. In Chapter 13, debtors retain ownership and possession of all their assets but must devote some portion of future income to repaying creditors, generally over three to five years. If the monthly income is less than the state's median income, the plan is for three years, unless the court finds "just cause" to extend the plan for a longer period.
If the debtor's monthly income is greater than the median income for individuals in the debtor's state, the plan must generally be for five years. A plan cannot exceed the five-year limit.
Relief under Chapter 13 is available only to individuals with regular income whose debts do not exceed prescribed limits. Secured creditors may be entitled to greater payment than unsecured creditors.
In contrast to Chapter 7, the debtor in Chapter 13 may keep all property, whether or not exempt. If the plan appears feasible and if the debtor complies with all the other requirements, the bankruptcy court typically confirms the plan and the debtor and creditors are bound by its terms.
Creditors have no say in the formulation of the plan, other than to object to it, if appropriate, on the grounds that it does not comply with one of the Code's statutory requirements. When the debtor completes payments pursuant to the terms of the plan, the court formally grant the debtor a discharge of the debts provided for in the plan. In , the number of insolvencies reached record highs in many European countries.
The increase in the number of insolvencies, however, does not indicate the total financial impact of insolvencies in each country because there is no indication of the size of each case. An increase in the number of bankruptcy cases does not necessarily entail an increase in bad debt write-off rates for the economy as a whole. Bankruptcy statistics are also a trailing indicator.
There is a time delay between financial difficulties and bankruptcy. In most cases, several months or even years pass between the financial problems and the start of bankruptcy proceedings. Legal, tax, and cultural issues may further distort bankruptcy figures, especially when comparing on an international basis.
Two examples:. The insolvency numbers for private individuals also do not show the whole picture. Only a fraction of heavily indebted households file for insolvency. Two of the main reasons for this are the stigma of declaring themselves insolvent and the potential business disadvantage. Following the soar in insolvencies in the last decade, a number of European countries, such as France, Germany, Spain and Italy, began to revamp their bankruptcy laws in They modelled these new laws after the image of Chapter 11 of the U.
Bankruptcy Code. Currently, the majority of insolvency cases have ended in liquidation in Europe rather than the businesses surviving the crisis. These new law models are meant to change this; lawmakers are hoping to turn bankruptcy into a chance for restructuring rather than a death sentence for the companies.
Technically, states do not collapse directly due to a sovereign default event itself. However, the tumultuous events that follow may bring down the state, so in common language we do describe states as being bankrupted. Some examples of this are when a Korean state bankrupted Imperial China causing its destruction, or more specifically, when Chang'an 's Sui Dynasty war with Pyongyang Goguryeo in A. From Wikipedia, the free encyclopedia. Legal status. For the Phoenix album, see Bankrupt!
Main article: History of bankruptcy law. See also: Australian insolvency law. Main article: Insolvency law of Canada. Main article: Consumer bankruptcy in Canada. Main article: Bankruptcy in China. This section needs to be updated. Please update this article to reflect recent events or newly available information.
December Main article: Insolvency and Bankruptcy Code. Main article: Insolvency law of Russia. Main article: South African insolvency law. Main article: Insolvency law of Switzerland. Main articles: UK insolvency law , Liquidation , and Administration insolvency. Main article: Bankruptcy in the United States. This section needs additional citations for verification.
Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. A treatise on the law and proceedings in bankruptcy. The W. Anderson Co. Online Etymology Dictionary. Archived from the original on 23 March Retrieved 22 April Archived from the original on Merriam-Webster Dictionary. Oxford Dictionaries.