If your CMI exceeds the State of New Jersey median income, then the bankruptcy means test applies a more complicated expense formula to determine your eligibility to file for chapter 7 case. The formula starts with your CMI and then it deducts several categories of allowed expenses to calculate your “net monthly income†which is presumed to be available to pay general unsecured creditors. The bankruptcy means test deducts certain expense categories from “current monthly income†to arrive at your “disposable income.â€
B. Most debtors income levels are under the median income levels, and they are not affected by the means test.
The majority of debtors who consider filing for bankruptcy are under the median state income level. Therefore, most debtors pass the means test, and can file for a chapter 7. Any debtors who are over the State of New Jersey median income may have a more difficult time filing a chapter 7 case, and they may be forced to file for a chapter 13 case. The bankruptcy means test will not bar a debtor from filing a bankruptcy. Instead, the means test will only help determine what type of bankruptcy the debtor must file.
C. Bankruptcy Means Testing and Business Bankruptcy Cases
The bankruptcy means test does not apply in a business bankruptcy case. Business bankruptcy cases are the most significant exception to the new means testing requirements. Means testing only applies if the debts are “primarily consumer debts.†The “means test†does not apply to cases wherein a debtor incurs most of their debt in connection with the operation of a failed small business. Business bankruptcy cases are completely exempt from the means testing requirements. It is readily apparent that the new bankruptcy code favors business bankruptcy cases over consumer bankruptcy cases. Therefore, a bankruptcy court can’t dismiss a business bankruptcy case under the abuse standards that only apply to consumer cases.