Form 122C and the Chapter 13 Means Test

Alabama Attorneys Counseling Individuals on Bankruptcy

People who are having difficulty managing their debts may be able to file Chapter 13 bankruptcy. This type of bankruptcy lasts 3-5 years, during which time you will need to make a monthly payment that will be distributed among your creditors. To file for Chapter 13, you need to file Form 122C. Entering into a debt repayment plan is a serious commitment, and it is important to consult an Alabama bankruptcy lawyer about filing for Chapter 13 in this state. It is important to complete this form thoroughly to maximize your chances of receiving a discharge of all dischargeable debts when this process ends.

Form 122C and the Chapter 13 Means Test

Form 122C is really two forms: 122C-1 and 122C-2. The first form is a statement of your current monthly income and calculation. You will need to give the court information about your income over the past six months and determine how long this plan should last. On this form, you calculate your annual income and compare it to Alabama’s median income.

In the first part of Form 122C-1, you provide the court with information about your marital status and all sources and amounts of your income. The income to be reported includes all sources of income except Social Security for the six months before filing for bankruptcy, such as wages, salary, income from a business, income from rental properties, and pension or retirement income. After determining your monthly income, you must determine whether you can take a marital adjustment deduction and then multiply the monthly income minus any available deduction to determine your annual income. This amount is compared to Alabama’s median income.

The purpose of Form 122C-1 is to see whether your income falls below the median income. If your income falls below the median income, you must commit to making Chapter 13 payments for three years in most cases. Furthermore, you can use your actual expenses to determine your disposable income and monthly payment for those three years, rather than a preset figure.

Form 122C-2 must be completed if your income sits above the Alabama median. When you determine your available disposable income to make monthly payments, you will need to use preset amounts for your basic necessities, rather than your actual expenditure amounts. You can take deductions according to how many dependent children you have to support with the income, the amount withheld from your wages for qualified retirement plans, and certain additional expenses. You must commit to making debt repayment plan payments for five years.

Enlist a Bankruptcy Lawyer in Alabama

Chapter 13 bankruptcy is the appropriate way to obtain a discharge when you have enough income to pay back some or all of your debts. Far more tools to save property are available to you under Chapter 13 than under Chapter 7. At Grainger Hawley & Shinbaum, LLC, our Alabama bankruptcy attorneys can counsel individuals on completing Form 122C and the Chapter 13 Means Test. We have offices in Montgomery, Troy, and Prattville. Contact us at (334) 260-0500 or online to schedule a free consultation.