People often wonder what is involved in this so-called “means test.” The first thing you need to do to complete the means test is to determine your “current monthly income.” This is determined by finding the average of your income for the past 6 months, multiplied by 12, and then compared to the median income for families of your size in the state in which you reside. You must gather proof of any source of income from the last 6 months. On top of your pay stubs, this includes any child support, alimony, bonuses, and dividends you have received. If you are married your spouse’s income also matters even if they are not filing for bankruptcy. This is because your household is receiving support from your spouse and that money must to be available for creditors. If you run your own business you must determine your net income for the last 6 months with your gross income and business expenses.

Once you have then determined your current monthly income, that’s when you compare it to your state’s “median family income.” The median family income for your state is determined by the US Census Bureau by looking at the income level in every state where half the families make more and half the families make less. The median family income is also determined by the size of your family – since larger families are expected to have higher income numbers. Thus, every additional individual in the family increases your median family income. For example, if you have a family of three people you are considered to have a higher median family income than if you were a family of one.

In the end, the means test determines whether you are above or below a certain point – financially speaking. If you are above that certain level, then you will have to file for Chapter 13 and repay your debts over a period of 3 to 5 years (not the best news if what you’re looking for is a quick and painless elimination of debts). But if you are below that certain income level, then you will be able to proceed with your Chapter 7 filing.

The means test can be confusing to the common filer, but an experienced bankruptcy attorney knows all about it and can be very helpful in helping you to complete the means test. It is one of the first steps the lawyers here at Clark and Washington take in filing your bankruptcy.

Leading credit card lenders like Bank of America, Citigroup and Chase have incurred larger than normal losses due to increasing consumer defaults.

What does this mean to you?  If you are like many struggling Tennesseans, credit card lines of credit serve as a key source of consumer liquidity.  If your credit line is cut from $20,000 to $10,000 your emergency safety line will be that much smaller.   Do not be surprised to see your credit line reduced to a level below your current balance, meaning that you will being seeing overlimit fees not because you exceeded your limit, but because the credit card lender reduced that limit.

Consumer advocates recommend that you should avoid accessing more than 30 to 40% of your available credit line.  If you find yourself servicing larger balances than this, now is the time to start chipping away at those balances.

We also expect to see more bankruptcy filers who are forced into Chapter 7 or Chapter 13 because their credit card lenders will be taking an extremely hard line on overlimit fees and penalty interest rates.   Although we are a bankruptcy firm, we encourage all of neighbors not to let these hardline credit card industry policies drive you into bankruptcy.

Michael notes specifically that there is no immigration law, statute, or regulation that specifically forbids individuals who have filed for bankruptcy from applying for Naturalization. Additionally, there is no specific question on Form N-400, Application for Naturalization, inquiring into bankruptc.

However, he also notes that your immigration status can be affected if you have not filed required tax returns or if you owe money to the IRS.  Further, he notes that the INS could view bankruptcy as evidence of "poor moral character" which could be grounds to deny naturalization.

Mr. Shane suggests, and we agree, that if you are facing any type of immigration issue, that you reveal that fact to your Clark and Washington lawyer prior to actually filing and that you discuss your potential bankruptcy with your immigration counsel.

Clark and Washington regularly advises our clients and prospective clients to be extremely wary about any company that purports to have a "secret process" to reduce debt or cut interest rates.  Credit card companies, banks and other lenders are in business to make money and there are no secret back door channels to reduce debts.

Any reduction that you might see will be a reflection of whatever risk that the lender sees.  For example, consider the following:

Borrower 1: Bob lives in a single family home with a mortgage and a home equity line of credit.  He is current with his mortgage.  Bob and his wife earn $75,000 annually and he owes $5,000 to Creditor A, $5,000 to Creditor B and $7,500 to Creditor C.  He is current with all of his credit card debt but because of some other expenses, the minimum credit card payments leave him with little left over at the end of the month.

Borrower 2: Sally is a single mom with 3 kids who lives in an apartment.  She has lived in 3 different places over the past year and has broken 2 previous leases.  Sally used to work for a trucking company and earned $65,000 annually, but she lost her job 6 months ago and has been working temp jobs ever since.  Sally owes $5,000 to Creditor A, $5,000 to Creditor B and $7,500 to Creditor C.   Sally paid the minimum payments on credit cards for a few months, but she failed to pay anything in June and July and only paid August and September because of near constant harassment from bill collectors working for the credit card companies.

Bob and Sally have both retained the services of credit counseling services.  If you were a credit manager for Creditor C, how would you respond to a request for a reduction in balance and interest rate from the credit counselor?

Clearly, Sally represents a much higher risk.  She owns no real estate that can be encumbered by a lien and because of her erratic employment situation, it will be difficult to garnish her wages.  Sally also represents a risk that other creditors may sue her first, and therefore end up with superior rights to pursue assets.  Sally also appears to qualify for Chapter 7, which could wipe out all debt owed to Creditor C.

Bob, by contrast, represents a much lower risk.  He has a home, which could be encumbered by a judgment lien.  He has a stable job, which means that his wages could be garnished and because he is current with all payments he appears to have the capability of continuing to pay.

Creditor C's credit manager is likely to offer very little to Bob's representative.  There is very little risk that Bob will default, and it is possible that a call from a credit counselor will trigger Creditor C to increase the interest rate, reduce Bob's credit limit and shorten the grace period for payments.

Unsecured creditors have very little leverage and they generally take the position that the "squeaky wheel gets the grease."  Creditor C will do everything in its power to encourage Bob to direct his resources into paying Creditor C by increasing the pain factor (interest rates, shorter grace period).  The problem, of course, is that once Creditor C puts Bob in a higher risk category, his other creditors will spot this action on his credit reports and they will do the same, possibly leaving Bob with an unmanageable situation.

Now, what about Sally?  Creditor C's credit manager is likely to see Sally as a significant risk for total default or bankruptcy.  The credit manager is likely to offer Sally's credit counselor a deal to avoid that default, or worse, bankruptcy.  Sally's best deal would come if she can come up with a lump sum of $2,500 to $3,000.  Creditor C would be happy to "take the money and run."  Otherwise, the credit manager wants to do everything in his power to encourage Sally to devote her limited resources to paying Creditor C as soon as possible.  Terms might include a reduction in the total balance, lower minimum payments and a reduction in interest for a few months.

It is also possible that the credit manager will refuse to do anything.  If statistics complied internally by Creditor C document which type of negotiation is likely to result in higher rates of payments.  Perhaps a reduction in interest rates results in a higher payment rate for a person in Sally's position, or perhaps a 2 month moratorium on interest.

If Sally's account has been sold to a private debt buyer, that debt buyer may have its own business model for negotiating with delinquent account holders.

The point of walking you through this analysis about Bob and Sally is to demonstrate that any deal that Sally or Bob might get is the result of where these individuals fall within the business models used by Creditor C or a debt buyer who bought the account.  At best a private credit counselor may have some knowledge about the circumstances in which a creditor will negotiate but the terms of any "deal" will be set by the creditor.

In addition these "deals" are likely to be moving targets as creditors and debt buyers are constantly coming in and out of the market, and they are constantly adjusting their business models.

When you consider the number of complaints that the Florida Attorney General has received about private credit counselors, it would appear that many Floridians are not too happy with the results they are seeing.  If you are in a debt crisis, or if you see a crisis on the horizon, Clark and Washington encourages you to call our office for a no-obligation consultation.  We also recognize that bankruptcy is only one answer to debt issues, but it is not the only answer.  As attorneys we have a professional and ethical responsibility to offer advice that addresses your needs and not our profit.  Take advantage of this free consultation and debt evaluation by calling our office at 813-345-5954.

Here is our answer: the bankruptcy laws are very specific that you must include all of your debts when you file for bankruptcy.  You cannot include some bills and leave others out.  Realize that notice of your bankruptcy will shortly be included in your credit files so it is almost certain that all of your creditors will find out about your filing anyway.

We strongly urge you to provide your bankruptcy lawyer with a copy of your credit report and to advise your lawyer about all of your debts.  Full disclosure will result in your best bankruptcy results.