by Caroline Lewis, Managing Bankruptcy Attorney for The Brad Hendricks Law Firm
The Brad Hendricks Law Firm is pleased to announce that the United States Trustee’s Office released the updated Means Test numbers on May 15, 2015. The means test is used in bankruptcy proceedings to help determine a consumer’s eligibility to file for Chapter 7 bankruptcy protection. It is also used in Chapter 13 bankruptcy to determine how much a consumer has to pay back to unsecured creditors. The test, applied by attorneys, bankruptcy trustees, and bankruptcy courts, employs objective and uniform standards adopted by the United States Trustee’s Office, in an effort to determine debtors’ ability to pay debt.
The allowable living expenses include standard allowances for food, clothing and related services, housekeeping supplies, personal care products and services and a catchall miscellaneous section. The allowances did not change this year and remain $585 a month for a family of one, $1,092 a month for a family of two and $1,249 a month for a family of three. As the family size increases so do the allowances. For a family of four, the allowance is $ 1,513 a month and for a family of five, it is $ 1,891 a month.
The new median income information was also released for the State of Arkansas. According to the United States Trustee’s Office, the median income went up across the board for all family sizes. The median income is used to determine the length of a payment plan in a Chapter 13 bankruptcy. A consumer whose income is over the median income will be required to propose a minimum five year plan. A consumer with an annual income less than the median will be allowed to propose a Chapter 13 bankruptcy payment plan that runs from three years up to five years.
For the State of Arkansas, the median income for one person is $39,155. This is an increase from last year of $1,531. For a family of two, the median income rose to $47,780 versus $47,176 for last year. For a family of three, the median income is now $52,613. This represents a slight increase from the median last year of $51,498. A family of four saw its median income rise to $59,092. This is down from last year’s median of $59,187. Finally, a family of five saw the median income decrease to $67,192 this year. The median income is now $67,192 for a family of five, which is down from last year’s median income of $67,287.
For some consumers in Arkansas that are contemplating filing bankruptcy, the new higher median income numbers could make a difference between qualifying for Chapter 7 bankruptcy or having to pay a portion of their debt back in a Chapter 13 bankruptcy.