Filing for bankruptcy in Wisconsin—the Chapter 7 “means test”
The car is old, the tires are worn and the transmission is beginning to make sounds that you know are not the sounds of a happy transmission. However, you also know that bankruptcy is a real possibility in your future. What do you do? Should you try and buy a better car now with whatever financing terms you can get? What are the results of taking on more debt just before filing for bankruptcy? Will you lose the car anyway if you do file for bankruptcy? All are good questions.
Meeting the means test
One of the first hurdles anyone filing for a Chapter 7 bankruptcy must face is the “means test,” which is intended to disqualify filers who have enough income from wiping out their debts. If your average income for the six months prior to filing bankruptcy is below the median income for Wisconsin, the means test is automatically met and you may quality for the Chapter 7 bankruptcy. If your average income is above Wisconsin’s median income, then a more detailed analysis of your income and expenses is made. For some expenses, the test uses national and local averages. For certain other expenses, however, actual expenses are used. A car payment is one of these expenses. If the car payment makes the difference between passing the means test or failing it, the trustee may argue that you abused the bankruptcy system to qualify when you otherwise would not have. It helps if you can prove that your old car was on its last leg.
Exemptions that may apply
Assuming you get past the means test, then the question is whether you can keep the car or whether the trustee will take it to pay off creditors. Wisconsin’s motor vehicle and personal property exemptions may save the car from the trustee.
Seeking an attorney’s assistance
Navigating the intricacies of the Bankruptcy Code and the application of Wisconsin law can be daunting, even after the difficult decision to file for bankruptcy has been made. An experienced Wisconsin bankruptcy attorney can answer questions before you file and navigate the bankruptcy petition through the details of the bankruptcy process.