4 Requirements to Prove ‘Special Circumstances’ If You’re Failing the Chapter 7 Means Test

Most people who file Las Vegas bankruptcy choose chapter 7 because it’s quick, and they have mainly consumer debt. The Bankruptcy Code, however, doesn’t simply let anyone file in this chapter because it requires them to pass the “means test.” Debtors with incomes exceeding the median for their state will face dismissal for filing what appears to be an abusive filing or they will have to convert their case to a chapter 13 bankruptcy. One other option that isn’t often discussed remains for people whose incomes are above the median: showing “special circumstances” under § 707(b)(2)(B) to rebut the presumption of an abusive filing.

There are two situations the statute identifies for allowing chapter 7 debtors to claim special circumstances when their incomes are above the means test: a “serious medical condition” and a “call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.” From the statute’s text it appears that these two special circumstances are only examples and does not prevent the possibility of others. Here are the requirements a debtor must meet to claim special circumstances and rebut the presumption of an abusive filing because their incomes are above the state median.

  1. Debtors must document their additional expenses or adjustments to their incomes due to the special circumstance.
  2. They must also include a detailed explanation of the additional expenses or adjustments to their incomes to show they are necessary and reasonable.
  3. Debtors must swear under oath as to the accuracy of the additional expenses or adjustments to their incomes, as well as the justifications for them.
  4. The additional expenses or adjustments to income must reduce debtors’ monthly income calculations so that they otherwise pass the means test.

Significant accounting work is necessary to escape the means test and stay in chapter 7, so rebutting the presumption of an abusive bankruptcy filing by showing special circumstances is not recommended for someone who is not represented by an experienced bankruptcy lawyer.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.

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