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Concerns that Means Test Would Limit a Debtors Eligibility for Bankruptcy Relief have Turned Out to Be Exaggerated According to Latest ABI Poll

Contact: John Hartgen
             703-894-5935
             jhartgen@abiworld.org

CONCERNS THAT MEANS TEST WOULD LIMIT A DEBTOR’S ELIGIBILITY FOR BANKRUPTCY RELIEF HAVE TURNED OUT TO BE EXAGGERATED, ACCORDING TO LATEST ABI POLL

July 12, 2010, Alexandria, Va. — Concerns that the means test created by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) would limit a debtor’s eligibility for bankruptcy relief have turned out to be exaggerated, according to a majority (53 percent) in ABI’s latest Quick Poll. Thirty-one percent “agreed strongly” and 22 percent “somewhat agreed” that after four years of utilizing means testing in consumer bankruptcy cases under BAPCPA, concerns that the means test would limit a debtor’s eligibility for relief have largely turned out to be unfounded.

Implemented more than four years ago by BAPCPA, the means test is used by the courts to determine a debtor’s eligibility for filing for chapter 7 or chapter 13 bankruptcy. To apply the means test, courts look at the debtor's average income for the six months prior to filing and compare it to the median income of an individual for that state. The means test factors in the debtor’s gross income and deducts secured and priority debt payments, as well as living-expense allowances. If after completing the means test the debtor has sufficient disposable income to make payments into a chapter 13 reorganization plan, the debtor is not eligible to file for chapter 7 liquidation. Prior to BAPCPA’s passage into law, consumer advocates were concerned that means test would limit a debtor’s eligibility for bankruptcy relief.

Forty percent of respondents, however, thought that the concerns that the means test would limit a debtor’s eligibility for bankruptcy relief are still warranted. Twenty-nine percent “disagreed strongly” and 11 percent “somewhat disagreed” that concerns were exaggerated that the means test would inhibit a debtor’s eligibility for bankruptcy relief. Five percent did not know or had no opinion on the issue.

ABI members and members of the public were welcome to submit their response to the statement: “After four years of experience, concerns that the means test would limit a debtor’s eligibility for relief have turned out to be exaggerated.”

ABI’s Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,600 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.