The bankruptcy means test has a fatal weakness in its attempt to keep people out of bankruptcy.
Like so much recently, it’s health care.
It’s health care, in the future, to be paid before your creditors get any money in your bankruptcy.
It works because, in a logic that only Congress could employ, the means test deducts future expenses from your past income.
That’s the universal formula that is supposed to mathematically determine whether a person genuinely “needs” bankruptcy.
If you pass the means test, you get to choose the chapter of bankruptcy that furthers your goals.
Fail, and you’re limited to Chapter 13, or some non bankruptcy form of relief.
So, the magic calculation deducts future living expenses in certain categories from income from your recent past.
But, since we don’t know what the future brings, we get to project what those deductible expenses might be.
Project: estimate or forecast (something) on the basis of present trends
The projected future expense that swings the formula has to be health care. [Read more…]