Childcare Expenses and the Means Test in Bankruptcy
The purpose of the means test in Chapter 13 bankruptcy cases is to determine the minimum amount that an above-median debtor has to pay back to general unsecured creditors (e.g. credit cards, medical bills, etc). The purpose of the means test in Chapter 7 bankruptcy cases is to determine whether a filing by an above-median debtor whose debts are primarily consumer in nature is presumptively abusive or not. The means test deducts various allowances and actual expenses from the debtor’s household income received in the prior 6 months. One of the line items that is an actual expense is childcare (e.g. baby-sitting, day care, nursery, preschool, before school, after school, track out, etc.). As such, there are instances where the benefit of economizing on childcare expenses will be solely for the general, unsecured claim holders. In a way similar to how the means test can function to reward the debtor with a luxury vehicle payment, the means test can function to reward a debtor who elects “Cadillac” quality childcare. Every case is different and should be evaluated by a qualified attorney. There are many instances where childcare expenses will have no material impact on the means test.