Nikolai`s Blog Site

When looking at the means test and the current recession, two factors in a simple analysis jump out at you.  And both are designed to punish consumers for factors beyond their control.

First, the consumer’s income for the test is based on the prior six-months.  In a declining economy, this virtually always means the consumer’s income will be overstated.  It will imply that they can afford to repay something or repay more if they filed Chapter 13 when they no longer can.  It is up to the Justice Department and the courts to minimize the impact of such unjust measurement methods.

A second problem awaits as well.  If the state’s economy is in decline, the state’s median income may begin to decline.  We have not yet seen this occur on a broad-scale during this recession.  But if it continues for a long time, we may well see real declines in median household incomes.  Unfortunately, the cost of living shows no sign of coming down accordingly, though.  If your income did not decline at the same pace as your neighbors, even if you have no more money left each month, you may have fewer options and one of them might not be bankruptcy filing.