New Means Test numbers are out for bankruptcies filed on or after 11/1/2020. All of the median income numbers are going up for Wisconsin as follows:
1 person household goes up from $52,730 to $54,660;
2 person household goes up from $68,363 to $72,171;
3 person household goes up from $83,607 to $87,353; and
4 person household goes up from $100,098 to $103,708.
(Add $9,000 for each household member above 4.)
These are significant increases. The last time these numbers were changed we saw an average increase of $1,356 for the households of 1 through 4. This time they average a change of $3,273.50. This will make those Debtors who were just missing out on being able to file a Chapter 7 because of Means Test issues now able to do so. For Chapter 13 Debtors it may significantly reduce the amount required to be paid on unsecured nonpriority debts in their Chapter 13 Plan. If you are considering bankruptcy, call us to find out if these new numbers will be beneficial to you.
If you are considering filing a bankruptcy, you may wonder, “Am I alone?” Certainly not. As you can see from the statistics below, in just a one year period over 90,000 Chapter 7 consumer bankruptcy cases were filed in the Upper Midwest. The following is based on bankruptcy filings from April 1, 2019 to March 31, 2020 according to statista.com and from state population figures from worldpopulationreview.com.
STATE CH. 7 FILINGS (Non-Bus.) POPULATION CASES AS % OF POPULATION
Illinois 30,107 12,659,700 .00237
Michigan 22,599 10,045,000 .00225
Indiana 14,657 6,745,350 .00217
Wisconsin 11,228 5,851,750 .00192
Iowa 4,192 3,179,850 .00132
Minnesota 7,381 5,700,670 .00129
How does Wisconsin compare to other Upper Midwest states when it comes to filing for bankruptcy? Compared to other Upper Midwest states in our vicinity, Wisconsin is in the middle of the pack for non-business Chapter 7 bankruptcy filings as a percentage of the population. The number of Debtors is actually much higher because many of the cases include two debtors when they involve a married couple filing a joint case.
Median income numbers for the bankruptcy Means Test in Wisconsin will go up on 4/1/2020 as follows:
1 person household: $52,730
2 person household: $68,363
3 person household: $83,607
4 person household: $100,098
Add $9,000 for each individual in excess of 4.
If your gross income is under those amounts you will almost always pass the Means Test and be able to file a Chapter 7 case. If you are over those amounts, you may or may not pass the Means Test, but it becomes a lot more complicated. When you are over those median amounts, the kinds and amounts of your debts become very important. For example, having large amounts of tax debt or child support debt can allow an above-median income earner to pass the Means Test. Also, deductions from your paycheck for health, disability and life insurance, union dues, child support and taxes can help you pass the Means Test. To know for sure, your pay stubs from the past 6 calendar months need to be examined by a bankruptcy attorney.
The New York Times reported on 08/05/2018 in a piece by Tara Siegel Bernard that, “The rate of people 65 and older filing for bankruptcy is three times what it was in 1991…” The New York Times article is largely based on a study by the Consumer Bankruptcy Project.
One example in the article sounds very similar to stories I have heard as a bankruptcy attorney in Janesville. “Cheryl Mcleod of Las Vegas filed for bankruptcy in January after struggling to keep up with her mortgage payments and other expenses. “I am 70, and I am working for less money than I ever did in my life,” she said. “This life stuff happens.” “ “Much like the broader population, people 65 and older usually cited multiple factors. About three in five said unmanageable medical expenses played a role. A little more than two-thirds cited a drop in income. Nearly three-quarters put some blame on hounding by debt collectors,” said the article.
If you find yourself in a similar situation bankruptcy may be able to provide you with the fresh start that you need. Many times older people can avoid bankruptcy for the simple fact that they are what is referred to as being “judgment proof.” They can be sued, but the creditor(s) can’t really do anything to enforce the judgment because Social Security cannot be garnished. If you would like to get further information about whether bankruptcy would be appropriate for you, we can talk to you on the phone, or for a more in depth conversation you can make an appointment for a free consultation with a bankruptcy attorney at our office.
Madison Attorney David Krekeler is known for putting on entertaining and informative seminars for bankruptcy attorneys. I have attended several of them, and one thing that he often emphasizes in these talks is the importance of disclosure. As David puts it, just as the three most important things in real estate are “location, location, location,” the three most important things in bankruptcy are “disclosure, disclosure, disclosure.” If someone gets into trouble in a bankruptcy case, it is often because of a failure to disclose something about their finances. An example of this was reported by the Peoria Journal Star on 11/27/2017. http://www.pjstar.com/news/20171127/brimfield-man-sentenced-for-concealing-assets-during-bankruptcy-filing
A man from Brimfield, Illinois “was sentenced last week to home confinement and a $3,000 fine for concealing $100,000 worth of insurance policies when he filed for bankruptcy.” Initially, the man had reported no life insurance policies on his bankruptcy schedules. He then amended his schedules to reflect his ownership of one life insurance policy worth $3,000. It was later discovered that he in fact owned seven life insurance policies worth a total of $100,000. “He also admitted he hid three cashier’s checks worth $65,000 and a 2005 motorcycle.”
Obviously, this guy was pretty outrageous in his failure to disclose, but his story shows that it is important that a debtor take the completion of his or her bankruptcy forms seriously. However, this shouldn’t cause the debtor to lose sleep over whether their 10 year old couch is worth $200 or $250. You need to provide information to the best of your knowledge and ability. If you make an honest mistake and forget to provide some information in your forms, you are allowed to amend your forms accordingly.