Cannon, No. 10-63263-A-7F (Bankr. E.D. Calif., May 24, 2011).
If you file for Chapter 7 bankruptcy, you need to pass a “means test” in order for your case not to be converted to Chapter 13. The idea behind the test is that many debtors used to abuse the bankruptcy system by filing for Chapter 7 bankruptcy and wiping clean their debts when they could afford to pay more to creditors in the course of a Chapter 13 plan.
The test consists of you providing information about how much money to earn and how much property you own. You are not allowed to take your personal expenses from that, but rather the expenses of a typical debtor in your income level. After those expenses are subtracted from your income, the court will look to see if you have enough “disposable” income to pay creditors in Chapter 13.
In this case, the individuals who filed for Chapter 7 were perfectly qualified expect for the fact that they had a large amount (over $150,000) of credit card debt. Because this debt would completely disappear in Chapter 7, without the debtors losing any assets, the court found that it would not be fair for them to wipe clean their debt in a Chapter 7 case. Instead, their case was converted to Chapter 13, where they would be forced to pay a certain amount every month toward this credit card debt. They would not be permitted to get rid of the remaining debt until they had completed 3-5 years of this.
To read the full case in re: Canon here.
If you are dealing with any of the discussed topics yourself including massive credit card debt or have any questions at all, it would be best to seek the advice of a competent Tucson bankruptcy lawyer.
Stephen M. Trezza