This morning, I saw the new Means Test numbers that will be implemented on March 15, 2011. These figures are derived from the IRS collection guidelines, which are partially influenced by economic factors. Surely you have noticed a recent increase in gasoline prices at the pump. I read in the Des Moines Register that the price of gasoline per gallon increased by approximately 34 cents in a matter of weeks! Much of the increase in the price of petroleum is directly attributable to the rising price of oil. The price of oil has surpassed $100 per barrel. When the price of crude rises, you and I experience more than just an increase in the cost of gasoline.
As a result of our society's reliance on oil and its byproducts, the price of everything increases when oil prices rise. The cost of shipping materials increases. Costs associated with sowing and harvesting food increase. The expense of heating and lighting increases. All of these expenses increase the price of the products that you and I consume because the store passes along the costs. It is very easy.
As stated previously, everyone who petitions for bankruptcy is subject to the means test, and new numbers have been established to determine who qualifies for chapter 7 and chapter 13 bankruptcy. The median income for families of all sizes in Iowa has increased since the last update in December/January. The United States Bankruptcy Trustee Program (UST) and the Internal Revenue Service are also aware of the rising cost of living. As the cost of everything increases, so do the allowances used in the Means Test. On the surface, this appears to be positive news, as it suggests that more individuals will qualify for chapter 7 bankruptcies and be able to obtain a fresh start more quickly. Note that I highlighted ""on its face"" Let's examine the numbers I observed and contemplate their significance.
The first set of numbers I examined were the operating costs of the vehicles. Since almost all of my clients own a vehicle, this seemed like a suitable starting point. Due to the increase in gasoline (and presumably oil, parts, and anything else associated with vehicle maintenance and operation), the operating allowance has been increased by $2.00 per month! Indeed, the IRS and the must assume that the increase in the price of oil should only result in a $2.00 monthly increase in the cost of operating a vehicle. Amazing.
This is not the only location where I observed an increase. The food allowance for a family of four increased by a staggering $5.00 per month. In other terms, the food allowance increased by $1.25 per person. Has anyone heard of volume purchasing? Visit Costco! Housekeeping (vacuum, cleaning supplies, etc.) and clothing expenses remained unchanged. The costs of personal care (haircuts, detergent, shampoo, etc.) for a family of four increased by $1. Remember that is not $1.00 per individual, but $1.00 for a family of four. It likely indicates that my clients will have to reduce the number of showers they take each week. This is not ideal for me, as I attend a large number of meetings.
In addition, the accommodation and utility allowance was increased. These numbers are calculated for each Iowa county. Instead of listing each county, I will tell you that the utility and other non-mortgage expense allowance increased $11.00 for a family of four and $6.00 for a family of one. Remember that each of these monthly figures is for the entire family. Budget invoicing will not protect you when your bill is recalculated. The monthly mortgage payment for a family of four increased by $11.00. That is $132 per year, which is less than the increase in real estate taxes I will experience. Don't fault the City or County for the tax increase. Where do you think the funds for the police department, fire department, schools, road maintenance, and street lighting come from? This item will not become less costly because oil prices have increased. Perhaps we will see more officers on bicycles. In their bright yellow uniforms, they are highly noticeable. They will never be seen by the bad people. I am only teasing my police friends because I revere the police and recognize that they play a vital role in protecting my family.
I'm certain I've overlooked something, but these are the points that stood out to me. In conclusion, the costs associated with nearly every aspect of our lives are rising, and I doubt that anyone will receive a raise as a result of the rising price of oil. When we observe an increase in the Means Test allowances, we typically anticipate an increase in the number of individuals who qualify for chapter 7 bankruptcy. Looking at the increase proposed by the UST and the IRS feels like a smack in the face. Due to the increase in allowances, fewer people will qualify for chapter 7 bankruptcy. However, more people will qualify for chapter 7 because everyone will be insolvent.
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