Who can file?

11 USC § 109 and 707 detail who may file for bankruptcy protection. Under subsection (g), a who can file for bankruptcyperson can only file once every six months if:

“(1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or
(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title”

Therefore, a person should only file one petition every six months (or 180 days).

Additionally, there are income guidelines for who can file for a Utah chapter 7 bankruptcy. These guidelines are called the “Means Test” and a table can be found at the United States Trustee Website.

For a family of four in Utah, that family could make up to $64,780 per year and still qualify for a chapter 7 bankruptcy. The formula for figuring that out is as follows:

X = Gross Income from all sources for the past 6 complete months

(X / 6) * 12

Example Alan makes 2000, 3000, 2500, 1500, 3000, 2400 for Jan-May for a total of 14400. 14400 / 6 = 2400.  2400 * 12 = 28800.  28800 is less than 64780 (assuming Alan has a family of four) so he can file for a chapter 7 bankruptcy. If a person is over the allowed limit, there are additional steps one can take to still qualify under a “secondary presumption.” If a person is over the income limits however, there is a “presumption of abuse” that the person is using the bankruptcy code for relief, when said person should be attempting to pay back their debts.

Remember though that “[t]he heart of the bill’s consumer bankruptcy reforms consists of the implementation of an income/expense screening mechanism (‘needs-based bankruptcy relief or means testing’), which is intended to ensure that debtors repay creditors the maximum they can afford.” H.R.Rep. No. 109-31(1), 2005 U.S.C.C.A.N. 88, 89. (See Wieland v. Thomas, 382 BR 793 – Dist. Court, D. Kansas 2008).

How is family size determined for the Means Test under 707(b)? 

The United States Trustee’s office (USTO) considers several factors in determining “family size” for the Means Test. Principally, the United States Trustee uses the Federal IRS standards as set forth in  IRS publication 501. At its most basic level, a dependent is whomever you claim as a dependent on your income tax returns (though the analysis is fairly complicated beyond that). However, the USTO departs from the IRS analysis for “reasonable exceptions” such as unadopted children whom the debtor(s) support and/or similar circumstances.