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Current Monthly Income

In a typical bankruptcy filing, a debtor's current monthly income is determined by averaging the debtor's total gross income over the six month period that immediately precedes the debtor's bankruptcy filing. The figure derived from the formula is the debtor's current monthly income. This figure is then used to determine whether the debtor qualifies for a chapter 7 or a chapter 13 bankruptcy filing. This new current monthly income determination is called a means test, and was added to the United States Bankruptcy Code by Congress in 2005. The new rules regarding means testing remain controversial, and many argue that the means testing is unfair to debtors, making it harder for them to gain a fresh start in the event of a financial catastrophe.

Fast Facts

  • In 2009, bankruptcy filings were up 100% from 2007.
  • 80% of total bankruptcy filings in New York were Chapter 7 filings in August 2009.

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