The Form 22 “means test” is one of the most complicated documents in bankruptcy. Form 22 determines how much, if any, debtors can afford to repay to their creditors after they have decided to claim bankruptcy. If the debtors’ income is under the median for their household size, calculation of Form 22 is not required. Debtors are also exempt from Form 22 if the majority of their debt is non-consumer debt. In those situations, the repayment is determined by their monthly income and reasonable monthly expenses, without consulting Form 22.If a debtor’s gross income is above the median, the Form 22 Means Test must be computed. Form 22 is complicated and very difficult to compute without a working knowledge of how the form works. Generally speaking, Form 22 objectively determines if and how much debtors can afford to repay their creditors. Recent changes in income, large tax refunds, earned income tax credits, and high mortgage and property tax expenses can cause difficulties in calculating Form 22.
This calculation is complex and should be left to a bankruptcy lawyer. Form 22 generates two numbers. The first number is the debtor’s average gross income over the last six full calendar months. Gross income is determined by one’s paycheck, business profit/loss for self-employed debtors, rental income, unemployment benefits, retirement benefits, and generally almost every other source of income. The second number is the allowed deductions. The allowed deductions are based on household size and determined in part by the IRS national standards for household utilities, food, clothing, household supplies, personal care, and the like. They also include deductions for the following items: For more information about Bankruptcy Attorneys San Antonio click here
Mortgage payments and property taxes (if greater than the standard rent allowance).
Healthcare expenses, such as co-pays and prescription costs.
Cost of operation for vehicles, public transportation costs, and an allowance for car payments.
Payroll taxes and involuntary payroll deductions like union dues.
Term life insurance for dependents.
Court order payments (typically the child and spousal support).
Educational expenses for a physically or mentally challenged child.
Childcare expenses, such as babysitting and daycare.
Health insurance, disability insurance, and healthcare savings account.
Support of elderly or disabled individuals.
Some educational expenses for children under 18.
Once the calculation is completed, the difference between the income and deductions must be repaid to GUC over the course of five years. For example, if the gross income averages $5,000 per month and the allowed deductions total $4,700 per month, then the creditors must receive a total of $18,000 ($300 x 60 months). For assistance with the means test, seek proper bankruptcy advice.