- The credit industry succeeded in changing the way people file for bankruptcy by lobbying Congress to change the existing bankruptcy laws. People working in the credit industry felt that debtors had it too easy when they could just accumulate debt, declare themselves bankrupt and have all of their debts wiped out by the bankruptcy court. They were sure that many of the debtors who were having their debts discharged had the ability to pay those debts. The Bankruptcy Abuse Prevention and Consumer Protection Act provides a test that each debtor who files for bankruptcy must take to make sure the debtor does not have the ability to pay his debts.
- You begin the means test by comparing your family income to the median family income for a family of the same size in Oregon. If your family income lies below Oregon’s state median income, there is no presumption of abuse. You can file for Chapter 7 bankruptcy. At the time of publication, Oregon’s median family income for a family of two is $55,553 and $60,523 for a family of three.
- If your family income hovers above Oregon’s state median income, you will continue the means test to determine if there is a presumption of abuse. You will then use your family income in calculating your disposable income. The amount of disposable income you have left after paying your expenses will determine whether you are presumed to be attempting to abuse the bankruptcy system.
- In continuing the means test, you will deduct your monthly expenses from your current monthly income to come up with your monthly disposable income. Then multiply your monthly disposable income by 60. If your 60-month disposable income is less than $6,000, you can file for Chapter 7 bankruptcy. The presumption of abuse does not arise. If your 60-month disposable income is more than $10,000, you cannot file for Chapter 7 bankruptcy because the presumption of abuse arises.
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