One of the confusing parts of filing for bankruptcy is figuring out which chapter to file under. Chapter 7 and Chapter 13 both offer different advantages and disadvantages, and someone seeking to file must meet certain criteria. For Chapter 7 one of those criteria is being below the median level for the state that they live in. This is called the “means test” and it is designed to prevent people who can afford to pay off their debt from taking advantage of debt discharge options under Chapter 7.
Sometimes applicants who file for one form of bankruptcy must later convert to a different type, depending on changing circumstances. Recently, a judge in Florida joined with a minority of federal courts that have ruled that a person who files for Chapter 13 protection and later converts to Chapter 7 does not need to pass the means test.
In this case, the woman filed for bankruptcy under Chapter 13 and then lost her job and then converted to a Chapter 7 filing. Later, she found a new job that would have limited her eligibility for Chapter 7, but the judge allowed her to continue the process under that statute.
While this does not change the law in Florida, it does show that some judges here and around the country are looking closely at bankruptcy cases and adapting to fit the special circumstances of people in need to debt relief.
In any situation, it’s important to consult with an experienced bankruptcy attorney to find out what course of action is the best for a particular set of circumstances.
Source: Thomson Reuters News & Insight, “No means test for converted Chapter 13 cases, Florida judge says,” Nov. 5, 2012.