Bankruptcy Act Of 2005 Major Provision
The means test is designed to give debtors the relief they actually need and identify those who have the ability to repay a portion of their debts. The provisions relating to the means test in S. 256 would establish legal presumptions of abuse, adjustments to the means test criteria, and requirements for some debtors to reorganize under stricter Chapter 13 rules. These provisions would create more bright line rules and place limits on bankruptcy judges’ discretion. The bill also contains a “safe harbor” provision that may alleviate what some believe to be the harsh effect of the means test.
The safe harbor provision is designed to protect low-income debtors who might otherwise have their Chapter 7 cases dismissed because of the monetary levels created in the means test. The bill would require that the judge, U.S. Trustee, or bankruptcy administrator consider whether the debtor’s income is equal to or less than the highest national or applicable state median income in order to determine whether to seek dismissal of a Chapter 7 case.
Definition of “current monthly income.” S. 256 would exclude certain income from the means test, including Social Security benefits; payments to victims of war crimes or crimes against humanity; and payments to victims of international terrorism.